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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?

Today, let’s look backwards in time to 2003, and take a look at what happened to investors who asked that very question about Lowe’s Companies Inc (NYSE: LOW), by taking a look at the investment outcome over a twenty year holding period.

Start date: 12/15/2003


End date: 12/13/2023
Start price/share: $27.09
End price/share: $215.45
Starting shares: 369.14
Ending shares: 501.49
Dividends reinvested/share: $24.96
Total return: 980.45%
Average annual return: 12.63%
Starting investment: $10,000.00
Ending investment: $108,020.51

As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 12.63%. This would have turned a $10K investment made 20 years ago into $108,020.51 today (as of 12/13/2023). On a total return basis, that’s a result of 980.45% (something to think about: how might LOW shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Lowe’s Companies Inc paid investors a total of $24.96/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 4.4/share, we calculate that LOW has a current yield of approximately 2.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $27.09/share purchase price. This works out to a yield on cost of 7.53%.

More investment wisdom to ponder:
“Though tempting, trying to time the market is a loser’s game.” — Christopher Davis