“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 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 Steel Dynamics Inc. (NASD: STLD), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 07/05/2005 |
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| End date: | 07/01/2025 | ||||
| Start price/share: | $6.72 | ||||
| End price/share: | $130.16 | ||||
| Starting shares: | 1,488.10 | ||||
| Ending shares: | 2,299.73 | ||||
| Dividends reinvested/share: | $14.66 | ||||
| Total return: | 2,893.33% | ||||
| Average annual return: | 18.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $299,250.60 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 18.52%. This would have turned a $10K investment made 20 years ago into $299,250.60 today (as of 07/01/2025). On a total return basis, that’s a result of 2,893.33% (something to think about: how might STLD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Steel Dynamics Inc. paid investors a total of $14.66/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 2/share, we calculate that STLD has a current yield of approximately 1.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $6.72/share purchase price. This works out to a yield on cost of 22.92%.
More investment wisdom to ponder:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes
