“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
ResMed Inc. (NYSE: RMD) provides a useful case study in long-term equity compounding. Looking back over the past 20 years, the stock generated a strong total return for shareholders, with both capital appreciation and dividend reinvestment contributing to the outcome. For investors evaluating long-duration holdings, ResMed’s 20-year return illustrates how a durable business can translate into substantial wealth creation over time.
Using the period from 08/07/2006 through 08/04/2026, a hypothetical $10,000 investment in RMD grew to $119,883.24 with dividends reinvested. That equates to a total return of 1,098.50% and an average annual return of 13.22%.
RMD 20-Year Return Details
| Start date: | 08/07/2006 |
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| End date: | 08/04/2026 | ||||
| Start price/share: | $22.53 | ||||
| End price/share: | $223.14 | ||||
| Starting shares: | 443.85 | ||||
| Ending shares: | 537.11 | ||||
| Dividends reinvested/share: | $21.20 | ||||
| Total return: | 1,098.50% | ||||
| Average annual return: | 13.22% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $119,883.24 | ||||
The scale of the result is notable, but the annualized figure is what makes the comparison most useful. A 13.22% average annual return sustained over two decades is what drove the increase from $10,000 to nearly $120,000. That is the core lesson of long-term compounding: returns that may appear incremental on a yearly basis can produce outsized changes in ending value when given enough time.
These figures were computed using the Dividend Channel DRIP Returns Calculator, assuming dividends were reinvested. For the calculation, the closing price on the ex-dividend date is used for reinvestment.
How Dividends Affected ResMed’s Total Return
Over the 20-year period, ResMed paid $21.20 per share in cumulative dividends that were reinvested in the return calculation. That reinvestment increased the share count from 443.85 shares at the outset to 537.11 shares by the end of the measurement period. In other words, part of the ending value came not only from a higher stock price, but also from owning more shares over time.
This distinction matters when assessing long-term performance. Price return captures only the change in the stock price. Total return captures both price appreciation and cash distributions, assuming those distributions are put back to work. For dividend-paying stocks, total return is generally the more complete measure of shareholder outcomes.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $2.40 per share, RMD has a current yield of approximately 1.08% using the ending share price of $223.14. That is a relatively modest current income yield, which is common among companies where a meaningful portion of the return profile has come from earnings growth and share price appreciation rather than high cash payouts.
Another useful reference point is yield on cost. This metric compares the current annualized dividend to the original purchase price. Using the $2.40 annualized dividend and the 2006 starting price of $22.53, the yield on cost works out to 10.65%.
Yield on cost can help illustrate how dividend growth compounds for long-term holders. It is less useful as a valuation tool for new capital, since new buyers earn the current yield rather than the historical yield on an older purchase price. Even so, it offers a clear view into how holding a business through many years of operational expansion can reshape the income characteristics of the original investment.
What the 20-Year Return Suggests
ResMed’s long-term performance reflects more than market sentiment. Over multi-decade periods, sustained shareholder returns usually depend on business durability, the ability to grow revenue and cash flow, disciplined capital allocation, and resilience across economic cycles. ResMed operates in sleep and respiratory care, areas tied to ongoing healthcare demand rather than purely discretionary spending, which helps explain why the stock has been able to compound value over an extended period.
That does not imply a straight-line path. Even strong long-term compounders can experience valuation resets, periods of slower growth, or temporary pressure on margins and demand. For that reason, retrospective return analysis is most useful when paired with a forward-looking assessment of business quality, competitive position, growth drivers, and valuation.
Key Takeaways
- ResMed delivered a 1,098.50% total return from 08/07/2006 to 08/04/2026, assuming dividend reinvestment.
- A $10,000 investment grew to $119,883.24 over the period.
- The average annual return was 13.22%.
- Dividend reinvestment increased the share count from 443.85 to 537.11 shares.
- At an annualized dividend rate of $2.40 per share, the current yield is about 1.08% based on the ending price used here.
- Using the original purchase price of $22.53, the current dividend implies a yield on cost of 10.65%.
“The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.” — Benjamin Graham
