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

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a two-decade holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of General Mills Inc (NYSE: GIS) back in 2003. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 10/06/2003


End date: 10/04/2023
Start price/share: $23.40
End price/share: $63.10
Starting shares: 427.35
Ending shares: 786.65
Dividends reinvested/share: $28.14
Total return: 396.38%
Average annual return: 8.34%
Starting investment: $10,000.00
Ending investment: $49,666.39

As shown above, the two-decade investment result worked out well, with an annualized rate of return of 8.34%. This would have turned a $10K investment made 20 years ago into $49,666.39 today (as of 10/04/2023). On a total return basis, that’s a result of 396.38% (something to think about: how might GIS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that General Mills Inc paid investors a total of $28.14/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 2.36/share, we calculate that GIS has a current yield of approximately 3.74%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.36 against the original $23.40/share purchase price. This works out to a yield on cost of 15.98%.

More investment wisdom to ponder:
“In the long run, we are all dead.” — John Maynard Keynes