“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 Baxter International Inc (NYSE: BAX)? Today, we examine the outcome of a twenty year investment into the stock back in 2005.
| Start date: | 05/16/2005 |
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| End date: | 05/13/2025 | ||||
| Start price/share: | $20.23 | ||||
| End price/share: | $31.15 | ||||
| Starting shares: | 494.32 | ||||
| Ending shares: | 721.35 | ||||
| Dividends reinvested/share: | $15.49 | ||||
| Total return: | 124.70% | ||||
| Average annual return: | 4.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,470.55 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.13%. This would have turned a $10K investment made 20 years ago into $22,470.55 today (as of 05/13/2025). On a total return basis, that’s a result of 124.70% (something to think about: how might BAX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Baxter International Inc paid investors a total of $15.49/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 .68/share, we calculate that BAX has a current yield of approximately 2.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $20.23/share purchase price. This works out to a yield on cost of 10.78%.
One more piece of investment wisdom to leave you with:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
