“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into NetApp, Inc. (NASD: NTAP)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 05/14/2004 |
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| End date: | 05/13/2024 | ||||
| Start price/share: | $20.53 | ||||
| End price/share: | $108.15 | ||||
| Starting shares: | 487.09 | ||||
| Ending shares: | 637.93 | ||||
| Dividends reinvested/share: | $14.98 | ||||
| Total return: | 589.92% | ||||
| Average annual return: | 10.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $68,955.99 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 10.13%. This would have turned a $10K investment made 20 years ago into $68,955.99 today (as of 05/13/2024). On a total return basis, that’s a result of 589.92% (something to think about: how might NTAP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that NetApp, Inc. paid investors a total of $14.98/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/share, we calculate that NTAP has a current yield of approximately 1.85%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $20.53/share purchase price. This works out to a yield on cost of 9.01%.
Another great investment quote to think about:
“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” — Warren Buffett
