Photo credit:

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

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Raytheon Technologies Corp (NYSE: RTX) back in 2003: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 01/10/2003


End date: 01/09/2023
Start price/share: $40.48
End price/share: $99.60
Starting shares: 247.04
Ending shares: 383.45
Dividends reinvested/share: $26.66
Total return: 281.91%
Average annual return: 6.93%
Starting investment: $10,000.00
Ending investment: $38,221.72

As shown above, the twenty year investment result worked out well, with an annualized rate of return of 6.93%. This would have turned a $10K investment made 20 years ago into $38,221.72 today (as of 01/09/2023). On a total return basis, that’s a result of 281.91% (something to think about: how might RTX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Raytheon Technologies Corp paid investors a total of $26.66/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 2.2/share, we calculate that RTX has a current yield of approximately 2.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.2 against the original $40.48/share purchase price. This works out to a yield on cost of 5.46%.

More investment wisdom to ponder:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell