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

— 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 two-decade 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 Starbucks Corp. (NASD: SBUX), by taking a look at the investment outcome over a two-decade holding period.

Start date: 12/19/2003


End date: 12/18/2023
Start price/share: $8.03
End price/share: $96.56
Starting shares: 1,245.33
Ending shares: 1,583.82
Dividends reinvested/share: $14.88
Total return: 1,429.34%
Average annual return: 14.60%
Starting investment: $10,000.00
Ending investment: $152,876.58

As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 14.60%. This would have turned a $10K investment made 20 years ago into $152,876.58 today (as of 12/18/2023). On a total return basis, that’s a result of 1,429.34% (something to think about: how might SBUX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Starbucks Corp. paid investors a total of $14.88/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 2.28/share, we calculate that SBUX has a current yield of approximately 2.36%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.28 against the original $8.03/share purchase price. This works out to a yield on cost of 29.39%.

Another great investment quote to think about:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis