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

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering Deere & Co. (NYSE: DE) back in 2003, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 04/17/2003
$10,000

04/17/2003
  $276,044

04/14/2023
End date: 04/14/2023
Start price/share: $20.83
End price/share: $387.77
Starting shares: 480.08
Ending shares: 711.76
Dividends reinvested/share: $40.19
Total return: 2,659.98%
Average annual return: 18.04%
Starting investment: $10,000.00
Ending investment: $276,044.24

As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 18.04%. This would have turned a $10K investment made 20 years ago into $276,044.24 today (as of 04/14/2023). On a total return basis, that’s a result of 2,659.98% (something to think about: how might DE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Deere & Co. paid investors a total of $40.19/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 5/share, we calculate that DE has a current yield of approximately 1.29%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $20.83/share purchase price. This works out to a yield on cost of 6.19%.

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