“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Applied Materials, Inc. (NASD: AMAT) back in 2004, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 11/01/2004 |
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| End date: | 10/31/2024 | ||||
| Start price/share: | $15.99 | ||||
| End price/share: | $181.58 | ||||
| Starting shares: | 625.39 | ||||
| Ending shares: | 845.41 | ||||
| Dividends reinvested/share: | $10.51 | ||||
| Total return: | 1,435.09% | ||||
| Average annual return: | 14.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $153,621.94 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 14.63%. This would have turned a $10K investment made 20 years ago into $153,621.94 today (as of 10/31/2024). On a total return basis, that’s a result of 1,435.09% (something to think about: how might AMAT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 20 years, Applied Materials, Inc. has paid $10.51/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 1.6/share, we calculate that AMAT has a current yield of approximately 0.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $15.99/share purchase price. This works out to a yield on cost of 5.50%.
Another great investment quote to think about:
“In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.” — Ray Dalio
