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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Baker Hughes Company (NASD: BKR)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.

Start date: 04/18/2002


End date: 04/14/2022
Start price/share: $37.17
End price/share: $37.29
Starting shares: 269.03
Ending shares: 371.14
Dividends reinvested/share: $12.09
Total return: 38.40%
Average annual return: 1.64%
Starting investment: $10,000.00
Ending investment: $13,845.62

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 1.64%. This would have turned a $10K investment made 20 years ago into $13,845.62 today (as of 04/14/2022). On a total return basis, that’s a result of 38.40% (something to think about: how might BKR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Baker Hughes Company paid investors a total of $12.09/share in dividends over the 20 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).

Based upon the most recent annualized dividend rate of .72/share, we calculate that BKR has a current yield of approximately 1.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $37.17/share purchase price. This works out to a yield on cost of 5.19%.

Here’s one more great investment quote before you go:
“Never is there a better time to buy a stock than when a basically sound company, for whatever reason, temporarily falls out of favor with the investment community.” — Geraldine Weiss