
“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a two-decade holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into J.M. Smucker Co. (NYSE: SJM) back in 2005: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
Start date: | 02/03/2005 |
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End date: | 01/31/2025 | ||||
Start price/share: | $47.73 | ||||
End price/share: | $106.89 | ||||
Starting shares: | 209.51 | ||||
Ending shares: | 392.06 | ||||
Dividends reinvested/share: | $56.05 | ||||
Total return: | 319.07% | ||||
Average annual return: | 7.43% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $41,945.18 |
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 7.43%. This would have turned a $10K investment made 20 years ago into $41,945.18 today (as of 01/31/2025). On a total return basis, that’s a result of 319.07% (something to think about: how might SJM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that J.M. Smucker Co. paid investors a total of $56.05/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 4.32/share, we calculate that SJM has a current yield of approximately 4.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.32 against the original $47.73/share purchase price. This works out to a yield on cost of 8.46%.
One more investment quote to leave you with:
“Don’t look for the needle in the haystack, just buy the haystack.” — John Bogle