“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into MGM Resorts International (NYSE: MGM)? Today, we examine the outcome of a twenty year investment into the stock back in 2005.
| Start date: | 02/10/2005 |
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| End date: | 02/07/2025 | ||||
| Start price/share: | $38.44 | ||||
| End price/share: | $34.57 | ||||
| Starting shares: | 260.15 | ||||
| Ending shares: | 275.76 | ||||
| Dividends reinvested/share: | $1.62 | ||||
| Total return: | -4.67% | ||||
| Average annual return: | -0.24% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,530.66 | ||||
The above analysis shows the twenty year investment result worked out poorly, with an annualized rate of return of -0.24%. This would have turned a $10K investment made 20 years ago into $9,530.66 today (as of 02/07/2025). On a total return basis, that’s a result of -4.67% (something to think about: how might MGM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that MGM Resorts International paid investors a total of $1.62/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 .01/share, we calculate that MGM has a current yield of approximately 0.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .01 against the original $38.44/share purchase price. This works out to a yield on cost of 0.00%.
One more piece of investment wisdom to leave you with:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
