“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Texas Instruments Inc. (NASD: TXN)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 12/02/2002 |
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| End date: | 12/01/2022 | ||||
| Start price/share: | $19.77 | ||||
| End price/share: | $177.50 | ||||
| Starting shares: | 505.82 | ||||
| Ending shares: | 747.97 | ||||
| Dividends reinvested/share: | $29.27 | ||||
| Total return: | 1,227.64% | ||||
| Average annual return: | 13.80% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $132,880.27 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 13.80%. This would have turned a $10K investment made 20 years ago into $132,880.27 today (as of 12/01/2022). On a total return basis, that’s a result of 1,227.64% (something to think about: how might TXN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Texas Instruments Inc. paid investors a total of $29.27/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 4.96/share, we calculate that TXN has a current yield of approximately 2.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.96 against the original $19.77/share purchase price. This works out to a yield on cost of 14.11%.
Here’s one more great investment quote before you go:
“Though tempting, trying to time the market is a loser’s game.” — Christopher Davis
