“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 AMETEK Inc (NYSE: AME) 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: | 05/13/2005 |
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| End date: | 05/12/2025 | ||||
| Start price/share: | $10.89 | ||||
| End price/share: | $179.38 | ||||
| Starting shares: | 918.27 | ||||
| Ending shares: | 1,044.10 | ||||
| Dividends reinvested/share: | $8.55 | ||||
| Total return: | 1,772.91% | ||||
| Average annual return: | 15.77% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $187,334.43 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 15.77%. This would have turned a $10K investment made 20 years ago into $187,334.43 today (as of 05/12/2025). On a total return basis, that’s a result of 1,772.91% (something to think about: how might AME shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AMETEK Inc paid investors a total of $8.55/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 1.24/share, we calculate that AME has a current yield of approximately 0.69%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.24 against the original $10.89/share purchase price. This works out to a yield on cost of 6.34%.
Here’s one more great investment quote before you go:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
