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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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Baker Hughes Company (NASD: BKR)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.

Start date: 11/03/2003


End date: 11/01/2023
Start price/share: $28.00
End price/share: $34.84
Starting shares: 357.14
Ending shares: 497.78
Dividends reinvested/share: $12.41
Total return: 73.43%
Average annual return: 2.79%
Starting investment: $10,000.00
Ending investment: $17,341.35

As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 2.79%. This would have turned a $10K investment made 20 years ago into $17,341.35 today (as of 11/01/2023). On a total return basis, that’s a result of 73.43% (something to think about: how might BKR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Baker Hughes Company paid investors a total of $12.41/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 .8/share, we calculate that BKR has a current yield of approximately 2.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $28.00/share purchase price. This works out to a yield on cost of 8.21%.

One more piece of investment wisdom to leave you with:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John