“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
Warren Buffett’s observation about planting trees is a concise reminder that equity investing is fundamentally a long-term exercise. Over days or weeks, market moves are inherently unpredictable. A broad sell-off can occur at any time, including just after a new position is initiated. The key question for investors is not whether volatility will occur — it will — but how one intends to respond when it does.
For investors who adopt a multi-year horizon, short-term setbacks tend to matter far less than the long-run compounding of both earnings and dividends. With that in mind, it is instructive to look in the rear-view mirror and examine what has actually happened to a patient investor in a single, high-quality business over two decades.
Below, we review the outcome for an investor in Aon plc (NYSE: AON) who committed capital in 2006 and held for twenty years, with dividends reinvested.
| Start date: | 03/30/2006 |
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| End date: | 03/27/2026 | ||||
| Start price/share: | $41.23 | ||||
| End price/share: | $313.66 | ||||
| Starting shares: | 242.54 | ||||
| Ending shares: | 302.97 | ||||
| Dividends reinvested/share: | $26.38 | ||||
| Total return: | 850.29% | ||||
| Average annual return: | 11.91% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $94,953.68 | ||||
As the data show, the twenty-year investment outcome for Aon plc has been robust. An investor who committed $10,000 on 03/30/2006 and fully reinvested all dividends would have seen that position grow to approximately $94,953.68 by 03/27/2026. That translates into a total return of 850.29% and an annualized rate of return of 11.91%.
To put that in context, a return profile in the low double digits over two decades meaningfully exceeds long-run inflation and, depending on the exact comparison period, is competitive with or better than broad equity benchmarks. It illustrates the power of combining earnings growth, disciplined capital allocation and dividend compounding over extended holding periods. (These figures were computed with the Dividend Channel DRIP Returns Calculator.)
Dividends, Reinvestment And Compounding
Over these 20 years, AON’s total return has come from two sources: capital appreciation and cash distributions to shareholders. The share price advanced from $41.23 to $313.66, while the company paid out a cumulative $26.38 per share in dividends over the period, assuming all declared dividends were received.
In the scenario above, those dividends were not taken in cash but reinvested into additional AON shares. As a result, the investor’s share count increased from 242.54 to 302.97. That incremental ownership stake meant that future dividends were paid on a larger base of shares, and any subsequent price gains applied to more units of stock. This is the essence of compounding: income produces more assets, which in turn generate more income.
For the purpose of these calculations, the closing price on the ex-dividend date is used to determine the reinvestment price. While actual results would vary slightly depending on the precise reinvestment execution and tax circumstances of an individual investor, the analysis provides a reasonable approximation of the economic effect of a long-term dividend reinvestment strategy.
Current Yield And Yield On Cost
Based upon the most recent annualized dividend rate of $2.98 per share, we calculate that AON currently offers a dividend yield of approximately 0.95% on the recent share price. By traditional income-investing standards, this is a modest running yield, and AON is better characterized as a total-return compounder than a high-yield security.
However, it is also instructive to evaluate the position on a “yield on cost” basis. When the original purchase price of $41.23 per share is used as the denominator, the same $2.98 in annualized dividends equates to a yield on cost of 2.30%. In other words, today’s cash income stream, measured against the capital deployed in 2006, represents a materially higher effective yield than the current headline yield might suggest.
Yield on cost is not a conventional valuation metric, but it can be a useful way for long-term holders to frame the progress of an investment: as the dividend grows over time, the income produced on the original dollars invested can become increasingly meaningful, even when the current stock yield appears low because of strong price performance.
Aon’s Business Evolution Over Two Decades
Aon plc today is a global professional services firm providing risk, retirement and health solutions to corporate and institutional clients. Over the period in question, the company has shifted its portfolio away from more capital-intensive or lower-margin activities and toward advisory, brokerage and data-driven services with steadier fee-based revenue.
Key features that have underpinned AON’s long-term performance include:
- Diversified exposure across insurance brokerage, reinsurance, human capital consulting and health benefits.
- A largely recurring revenue model supported by multi-year client relationships and high switching costs.
- Consistent share repurchase activity, which has reduced the share count over time and enhanced per-share metrics.
- Disciplined capital allocation, with management balancing organic investment, bolt-on acquisitions, buybacks and a steadily rising dividend.
Over time, these factors have allowed AON to grow earnings per share and cash flows at a rate that supports both share price appreciation and a rising stream of shareholder distributions, despite periods of macroeconomic and market stress, including the 2008‑2009 financial crisis, the eurozone debt episode and the COVID-19 pandemic.
What The Past 20 Years Suggest About Time Horizon
Investors evaluating AON in 2006 faced the same uncertainty about the future that investors face today. Over the subsequent two decades, there were multiple episodes of elevated volatility in global equity markets, sector-specific drawdowns in financials, and numerous macroeconomic headwinds; yet a disciplined, long-term owner who held through these environments and reinvested dividends realized an 11.91% annualized total return.
This backward-looking case study does not guarantee that AON will deliver similar results over the next 20 years. Fundamentals, competition, regulation and interest-rate regimes can all change. However, it underscores several points that are central to long-term equity investing:
- Time in the market can be more important than attempts to time the market.
- Reinvestment of dividends can materially enhance long-run outcomes, particularly in companies that consistently increase payouts.
- Owning businesses with durable competitive positions and recurring revenue models can help investors stay invested through cycles.
- Short-term drawdowns, while uncomfortable, may prove relatively minor in the context of multi-decade compounding.
For investors considering AON or similar businesses today, the past two decades illustrate what can be achieved when a quality franchise, prudent capital allocation and a long investment horizon intersect. The more difficult question — and the one each investor must answer individually — is whether the current valuation, risk profile and expected growth are sufficient to warrant new capital at today’s price.
A Final Word On Investor Mindset
Regardless of the specific security under consideration, the AON example reinforces the importance of setting expectations and time horizons before initiating a position. Thinking in terms of five-, ten- or twenty-year outcomes can help investors focus less on short-term price noise and more on fundamentals: revenue growth, margins, capital allocation, balance sheet strength and management quality.
Here is one more enduring investment quote before you go:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham
Investing as an owner, rather than trading as a speculator, is ultimately what allows the power of compounding to work in an investor’s favor over time.
