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“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 two-decade holding period possibly?

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

Start date: 04/25/2003
$10,000

04/25/2003
  $113,761

04/24/2023
End date: 04/24/2023
Start price/share: $11.10
End price/share: $80.80
Starting shares: 900.90
Ending shares: 1,407.68
Dividends reinvested/share: $17.74
Total return: 1,037.40%
Average annual return: 12.92%
Starting investment: $10,000.00
Ending investment: $113,761.60

As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 12.92%. This would have turned a $10K investment made 20 years ago into $113,761.60 today (as of 04/24/2023). On a total return basis, that’s a result of 1,037.40% (something to think about: how might ADM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Archer Daniels Midland Co. paid investors a total of $17.74/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 1.8/share, we calculate that ADM has a current yield of approximately 2.23%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $11.10/share purchase price. This works out to a yield on cost of 20.09%.

One more investment quote to leave you with:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros