“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 Microsoft Corporation (NASD: MSFT), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 09/12/2005 |
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| End date: | 09/11/2025 | ||||
| Start price/share: | $26.61 | ||||
| End price/share: | $501.01 | ||||
| Starting shares: | 375.80 | ||||
| Ending shares: | 539.45 | ||||
| Dividends reinvested/share: | $29.27 | ||||
| Total return: | 2,602.68% | ||||
| Average annual return: | 17.91% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $270,269.42 | ||||
The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 17.91%. This would have turned a $10K investment made 20 years ago into $270,269.42 today (as of 09/11/2025). On a total return basis, that’s a result of 2,602.68% (something to think about: how might MSFT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Microsoft Corporation paid investors a total of $29.27/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 3.32/share, we calculate that MSFT has a current yield of approximately 0.66%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.32 against the original $26.61/share purchase price. This works out to a yield on cost of 2.48%.
One more piece of investment wisdom to leave you with:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
