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

— Warren Buffett

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a twenty year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 20 years to 2002, investors considering an investment into shares of Sherwin-Williams Co (NYSE: SHW) may have been pondering this very question and thinking about their potential investment result over a full twenty year time horizon. Here’s how that would have worked out.

Start date: 08/16/2002


End date: 08/15/2022
Start price/share: $9.94
End price/share: $257.34
Starting shares: 1,006.04
Ending shares: 1,358.85
Dividends reinvested/share: $16.37
Total return: 3,396.85%
Average annual return: 19.44%
Starting investment: $10,000.00
Ending investment: $349,817.37

As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 19.44%. This would have turned a $10K investment made 20 years ago into $349,817.37 today (as of 08/15/2022). On a total return basis, that’s a result of 3,396.85% (something to think about: how might SHW shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Sherwin-Williams Co paid investors a total of $16.37/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 2.4/share, we calculate that SHW has a current yield of approximately 0.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $9.94/share purchase price. This works out to a yield on cost of 9.36%.

More investment wisdom to ponder:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein