“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 Ralph Lauren Corp (NYSE: RL), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 09/30/2005 |
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| End date: | 09/29/2025 | ||||
| Start price/share: | $50.30 | ||||
| End price/share: | $308.64 | ||||
| Starting shares: | 198.81 | ||||
| Ending shares: | 260.43 | ||||
| Dividends reinvested/share: | $32.98 | ||||
| Total return: | 703.79% | ||||
| Average annual return: | 10.98% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $80,424.85 | ||||
The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 10.98%. This would have turned a $10K investment made 20 years ago into $80,424.85 today (as of 09/29/2025). On a total return basis, that’s a result of 703.79% (something to think about: how might RL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Ralph Lauren Corp paid investors a total of $32.98/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 3.65/share, we calculate that RL has a current yield of approximately 1.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.65 against the original $50.30/share purchase price. This works out to a yield on cost of 2.35%.
Here’s one more great investment quote before you go:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
