“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into International Paper Co (NYSE: IP) back in 2006: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 03/06/2006 |
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| End date: | 03/04/2026 | ||||
| Start price/share: | $30.54 | ||||
| End price/share: | $42.58 | ||||
| Starting shares: | 327.44 | ||||
| Ending shares: | 689.31 | ||||
| Dividends reinvested/share: | $28.18 | ||||
| Total return: | 193.51% | ||||
| Average annual return: | 5.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,356.95 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 5.53%. This would have turned a $10K investment made 20 years ago into $29,356.95 today (as of 03/04/2026). On a total return basis, that’s a result of 193.51% (something to think about: how might IP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that International Paper Co paid investors a total of $28.18/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 1.85/share, we calculate that IP has a current yield of approximately 4.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.85 against the original $30.54/share purchase price. This works out to a yield on cost of 14.21%.
Here’s one more great investment quote before you go:
“Generally, the greater the stigma or revulsion, the better the bargain.” — Seth Klarman
