“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 twenty year holding period for an investor who was considering Northrop Grumman Corp (NYSE: NOC) back in 2005, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 06/06/2005 |
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| End date: | 06/04/2025 | ||||
| Start price/share: | $50.36 | ||||
| End price/share: | $491.29 | ||||
| Starting shares: | 198.57 | ||||
| Ending shares: | 302.91 | ||||
| Dividends reinvested/share: | $73.77 | ||||
| Total return: | 1,388.19% | ||||
| Average annual return: | 14.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $148,866.75 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 14.45%. This would have turned a $10K investment made 20 years ago into $148,866.75 today (as of 06/04/2025). On a total return basis, that’s a result of 1,388.19% (something to think about: how might NOC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Northrop Grumman Corp paid investors a total of $73.77/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 9.24/share, we calculate that NOC has a current yield of approximately 1.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 9.24 against the original $50.36/share purchase price. This works out to a yield on cost of 3.73%.
More investment wisdom to ponder:
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert Allen
