“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 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 JPMorgan Chase & Co (NYSE: JPM)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 05/06/2004 |
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| End date: | 05/03/2024 | ||||
| Start price/share: | $37.60 | ||||
| End price/share: | $190.51 | ||||
| Starting shares: | 265.96 | ||||
| Ending shares: | 457.95 | ||||
| Dividends reinvested/share: | $40.85 | ||||
| Total return: | 772.45% | ||||
| Average annual return: | 11.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $87,313.18 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 11.44%. This would have turned a $10K investment made 20 years ago into $87,313.18 today (as of 05/03/2024). On a total return basis, that’s a result of 772.45% (something to think about: how might JPM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that JPMorgan Chase & Co paid investors a total of $40.85/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 4.6/share, we calculate that JPM has a current yield of approximately 2.41%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.6 against the original $37.60/share purchase price. This works out to a yield on cost of 6.41%.
One more investment quote to leave you with:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett
