Photo credit:

“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 Ross Stores Inc (NASD: ROST) back in 2003, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 07/14/2003


End date: 07/11/2023
Start price/share: $5.50
End price/share: $111.00
Starting shares: 1,818.18
Ending shares: 2,207.74
Dividends reinvested/share: $8.76
Total return: 2,350.59%
Average annual return: 17.34%
Starting investment: $10,000.00
Ending investment: $245,076.80

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.34%. This would have turned a $10K investment made 20 years ago into $245,076.80 today (as of 07/11/2023). On a total return basis, that’s a result of 2,350.59% (something to think about: how might ROST shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ross Stores Inc paid investors a total of $8.76/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 1.34/share, we calculate that ROST has a current yield of approximately 1.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.34 against the original $5.50/share purchase price. This works out to a yield on cost of 22.00%.

One more piece of investment wisdom to leave you with:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt