“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 Blackrock Inc (NYSE: BLK) back in 2003, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 09/22/2003 |
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| End date: | 09/19/2023 | ||||
| Start price/share: | $51.30 | ||||
| End price/share: | $688.96 | ||||
| Starting shares: | 194.93 | ||||
| Ending shares: | 308.50 | ||||
| Dividends reinvested/share: | $161.60 | ||||
| Total return: | 2,025.43% | ||||
| Average annual return: | 16.51% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $212,631.54 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 16.51%. This would have turned a $10K investment made 20 years ago into $212,631.54 today (as of 09/19/2023). On a total return basis, that’s a result of 2,025.43% (something to think about: how might BLK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Blackrock Inc paid investors a total of $161.60/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 20/share, we calculate that BLK has a current yield of approximately 2.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 20 against the original $51.30/share purchase price. This works out to a yield on cost of 5.65%.
One more investment quote to leave you with:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
