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“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 Wells Fargo & Co (NYSE: WFC)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.

Start date: 05/03/2004


End date: 05/01/2024
Start price/share: $28.49
End price/share: $59.52
Starting shares: 351.00
Ending shares: 617.91
Dividends reinvested/share: $22.48
Total return: 267.78%
Average annual return: 6.73%
Starting investment: $10,000.00
Ending investment: $36,809.73

As shown above, the twenty year investment result worked out well, with an annualized rate of return of 6.73%. This would have turned a $10K investment made 20 years ago into $36,809.73 today (as of 05/01/2024). On a total return basis, that’s a result of 267.78% (something to think about: how might WFC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Wells Fargo & Co paid investors a total of $22.48/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 1.4/share, we calculate that WFC has a current yield of approximately 2.35%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $28.49/share purchase price. This works out to a yield on cost of 8.25%.

More investment wisdom to ponder:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham