Photo credit:

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

— 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 twenty year holding period possibly?

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

Start date: 11/17/2003


End date: 11/16/2023
Start price/share: $51.67
End price/share: $150.10
Starting shares: 193.54
Ending shares: 335.11
Dividends reinvested/share: $54.12
Total return: 403.00%
Average annual return: 8.41%
Starting investment: $10,000.00
Ending investment: $50,323.54

As shown above, the twenty year investment result worked out well, with an annualized rate of return of 8.41%. This would have turned a $10K investment made 20 years ago into $50,323.54 today (as of 11/16/2023). On a total return basis, that’s a result of 403.00% (something to think about: how might JNJ shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Johnson & Johnson paid investors a total of $54.12/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 4.76/share, we calculate that JNJ has a current yield of approximately 3.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.76 against the original $51.67/share purchase price. This works out to a yield on cost of 6.14%.

Another great investment quote to think about:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport