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

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into 3M Co (NYSE: MMM)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.

Start date: 10/27/2003
$10,000

10/27/2003
  $20,765

10/25/2023
End date: 10/25/2023
Start price/share: $75.74
End price/share: $89.39
Starting shares: 132.03
Ending shares: 232.14
Dividends reinvested/share: $70.57
Total return: 107.51%
Average annual return: 3.72%
Starting investment: $10,000.00
Ending investment: $20,765.25

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 3.72%. This would have turned a $10K investment made 20 years ago into $20,765.25 today (as of 10/25/2023). On a total return basis, that’s a result of 107.51% (something to think about: how might MMM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that 3M Co paid investors a total of $70.57/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 6/share, we calculate that MMM has a current yield of approximately 6.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6 against the original $75.74/share purchase price. This works out to a yield on cost of 8.86%.

Here’s one more great investment quote before you go:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” — Warren Buffett