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

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering Morgan Stanley (NYSE: MS) back in 2004, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 04/15/2004


End date: 04/12/2024
Start price/share: $53.50
End price/share: $86.19
Starting shares: 186.92
Ending shares: 335.83
Dividends reinvested/share: $35.76
Total return: 189.45%
Average annual return: 5.46%
Starting investment: $10,000.00
Ending investment: $28,965.55

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 5.46%. This would have turned a $10K investment made 20 years ago into $28,965.55 today (as of 04/12/2024). On a total return basis, that’s a result of 189.45% (something to think about: how might MS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Morgan Stanley paid investors a total of $35.76/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 3.4/share, we calculate that MS has a current yield of approximately 3.94%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.4 against the original $53.50/share purchase price. This works out to a yield on cost of 7.36%.

Another great investment quote to think about:
“Taking risks is really the only way to consistently achieve above-average returns.” — Sam Zell