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

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?

Today, let’s look backwards in time to 2002, and take a look at what happened to investors who asked that very question about Lennar Corp (NYSE: LEN), by taking a look at the investment outcome over a twenty year holding period.

Start date: 04/08/2002


End date: 04/07/2022
Start price/share: $26.50
End price/share: $74.67
Starting shares: 377.36
Ending shares: 495.59
Dividends reinvested/share: $9.32
Total return: 270.06%
Average annual return: 6.76%
Starting investment: $10,000.00
Ending investment: $37,023.94

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 6.76%. This would have turned a $10K investment made 20 years ago into $37,023.94 today (as of 04/07/2022). On a total return basis, that’s a result of 270.06% (something to think about: how might LEN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Lennar Corp paid investors a total of $9.32/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 1.5/share, we calculate that LEN has a current yield of approximately 2.01%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.5 against the original $26.50/share purchase price. This works out to a yield on cost of 7.58%.

Another great investment quote to think about:
“The investor’s chief problem, even his worst enemy, is likely to be himself.” — Benjamin Graham