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“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 two-decade holding period for an investor who was considering General Dynamics Corp (NYSE: GD) back in 2005, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 01/20/2005
$10,000

01/20/2005
  $81,840

01/17/2025
End date: 01/17/2025
Start price/share: $50.45
End price/share: $266.67
Starting shares: 198.22
Ending shares: 307.12
Dividends reinvested/share: $58.24
Total return: 719.01%
Average annual return: 11.08%
Starting investment: $10,000.00
Ending investment: $81,840.35

As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 11.08%. This would have turned a $10K investment made 20 years ago into $81,840.35 today (as of 01/17/2025). On a total return basis, that’s a result of 719.01% (something to think about: how might GD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that General Dynamics Corp paid investors a total of $58.24/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 5.68/share, we calculate that GD has a current yield of approximately 2.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.68 against the original $50.45/share purchase price. This works out to a yield on cost of 4.22%.

Here’s one more great investment quote before you go:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros