“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Royal Caribbean Group (NYSE: RCL) 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: | 05/16/2005 |
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| End date: | 05/14/2025 | ||||
| Start price/share: | $43.95 | ||||
| End price/share: | $251.37 | ||||
| Starting shares: | 227.53 | ||||
| Ending shares: | 288.99 | ||||
| Dividends reinvested/share: | $17.82 | ||||
| Total return: | 626.45% | ||||
| Average annual return: | 10.42% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $72,662.22 | ||||
The above analysis shows the two-decade investment result worked out quite well, with an annualized rate of return of 10.42%. This would have turned a $10K investment made 20 years ago into $72,662.22 today (as of 05/14/2025). On a total return basis, that’s a result of 626.45% (something to think about: how might RCL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Royal Caribbean Group paid investors a total of $17.82/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 3/share, we calculate that RCL has a current yield of approximately 1.19%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $43.95/share purchase price. This works out to a yield on cost of 2.71%.
One more investment quote to leave you with:
“The best stock to buy is the one you already own.” — Peter Lynch
