“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a two-decade period?
Today, let’s look backwards in time to 2005, and take a look at what happened to investors who asked that very question about Microsoft Corporation (NASD: MSFT), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 10/20/2005 |
|
|||
| End date: | 10/17/2025 | ||||
| Start price/share: | $24.79 | ||||
| End price/share: | $513.58 | ||||
| Starting shares: | 403.39 | ||||
| Ending shares: | 579.05 | ||||
| Dividends reinvested/share: | $29.27 | ||||
| Total return: | 2,873.89% | ||||
| Average annual return: | 18.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $297,374.99 | ||||
As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 18.48%. This would have turned a $10K investment made 20 years ago into $297,374.99 today (as of 10/17/2025). On a total return basis, that’s a result of 2,873.89% (something to think about: how might MSFT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Microsoft Corporation paid investors a total of $29.27/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 3.64/share, we calculate that MSFT has a current yield of approximately 0.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.64 against the original $24.79/share purchase price. This works out to a yield on cost of 2.86%.
More investment wisdom to ponder:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
