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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 McKesson Corp (NYSE: MCK)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.

Start date: 02/10/2003


End date: 02/07/2023
Start price/share: $27.40
End price/share: $363.61
Starting shares: 364.96
Ending shares: 427.61
Dividends reinvested/share: $18.10
Total return: 1,454.85%
Average annual return: 14.70%
Starting investment: $10,000.00
Ending investment: $155,451.43

The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 14.70%. This would have turned a $10K investment made 20 years ago into $155,451.43 today (as of 02/07/2023). On a total return basis, that’s a result of 1,454.85% (something to think about: how might MCK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that McKesson Corp paid investors a total of $18.10/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 2.16/share, we calculate that MCK has a current yield of approximately 0.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.16 against the original $27.40/share purchase price. This works out to a yield on cost of 2.15%.

One more investment quote to leave you with:
“In the long run, we are all dead.” — John Maynard Keynes