“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 twenty year 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 Sherwin-Williams Co (NYSE: SHW), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 02/28/2005 |
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| End date: | 02/26/2025 | ||||
| Start price/share: | $14.77 | ||||
| End price/share: | $359.59 | ||||
| Starting shares: | 677.05 | ||||
| Ending shares: | 886.83 | ||||
| Dividends reinvested/share: | $22.25 | ||||
| Total return: | 3,088.97% | ||||
| Average annual return: | 18.89% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $318,804.30 | ||||
As we can see, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 18.89%. This would have turned a $10K investment made 20 years ago into $318,804.30 today (as of 02/26/2025). On a total return basis, that’s a result of 3,088.97% (something to think about: how might SHW shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Sherwin-Williams Co paid investors a total of $22.25/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 3.16/share, we calculate that SHW has a current yield of approximately 0.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.16 against the original $14.77/share purchase price. This works out to a yield on cost of 5.96%.
One more piece of investment wisdom to leave you with:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein
