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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 American International Group Inc (NYSE: AIG)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.

Start date: 11/11/2002


End date: 11/10/2022
Start price/share: $1,276.20
End price/share: $60.59
Starting shares: 7.84
Ending shares: 12.23
Dividends reinvested/share: $80.69
Total return: -92.59%
Average annual return: -12.19%
Starting investment: $10,000.00
Ending investment: $741.76

As shown above, the twenty year investment result worked out poorly, with an annualized rate of return of -12.19%. This would have turned a $10K investment made 20 years ago into $741.76 today (as of 11/10/2022). On a total return basis, that’s a result of -92.59% (something to think about: how might AIG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that American International Group Inc paid investors a total of $80.69/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 1.28/share, we calculate that AIG has a current yield of approximately 2.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.28 against the original $1276.20/share purchase price. This works out to a yield on cost of 0.17%.

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