“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 Travelers Companies Inc (NYSE: TRV), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 03/11/2005 |
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| End date: | 03/10/2025 | ||||
| Start price/share: | $37.89 | ||||
| End price/share: | $256.61 | ||||
| Starting shares: | 263.92 | ||||
| Ending shares: | 421.32 | ||||
| Dividends reinvested/share: | $47.60 | ||||
| Total return: | 981.14% | ||||
| Average annual return: | 12.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $108,020.51 | ||||
The above analysis shows the two-decade investment result worked out quite well, with an annualized rate of return of 12.63%. This would have turned a $10K investment made 20 years ago into $108,020.51 today (as of 03/10/2025). On a total return basis, that’s a result of 981.14% (something to think about: how might TRV shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Travelers Companies Inc paid investors a total of $47.60/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 4.2/share, we calculate that TRV has a current yield of approximately 1.64%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.2 against the original $37.89/share purchase price. This works out to a yield on cost of 4.33%.
One more investment quote to leave you with:
“The investor’s chief problem, even his worst enemy, is likely to be himself.” — Benjamin Graham
