“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote underscores the importance of thinking clearly about investment time horizon. Before buying any given stock, a long-term investor should ask: can we realistically envision holding this position for many years — even a two-decade period or longer?
Suppose a disciplined “buy-and-hold” investor was considering an investment in L3Harris Technologies Inc (NYSE: LHX) back in 2006. At that time, such an investor may well have been weighing this very question about time horizon and the merits of patiently owning a high-quality defense and aerospace contractor through a full market cycle.
L3Harris, in its current form, is the result of the June 2019 merger between L3 Technologies and Harris Corporation, creating one of the largest defense technology companies in the United States. The combined company focuses on communications, avionics, space and intelligence systems, and other mission-critical technologies. For long-term shareholders, this corporate evolution has been one of the drivers of value creation over the past two decades.
Had our hypothetical investor answered “yes” to a full two-decade investment horizon and then actually held for these 20 years, here is how that investment would have turned out, assuming dividends were reinvested throughout the period.
| Start date: | 04/06/2006 |
|
|||
| End date: | 04/02/2026 | ||||
| Start price/share: | $47.30 | ||||
| End price/share: | $356.00 | ||||
| Starting shares: | 211.42 | ||||
| Ending shares: | 318.19 | ||||
| Dividends reinvested/share: | $47.91 | ||||
| Total return: | 1,032.75% | ||||
| Average annual return: | 12.90% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $113,246.09 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 12.90%. Compounded over 20 years, that would have turned a $10K investment made in early April 2006 into $113,246.09 as of 04/02/2026. On a total return basis, that is a gain of 1,032.75%.
For context, over roughly the same period, the S&P 500 Index delivered an annualized total return in the high single digits, depending on the exact start and end dates. While index performance varies with methodology and timing, the above figures indicate that a long-term, dividend-reinvesting shareholder in L3Harris would have outpaced broad U.S. equity market returns over this particular 20-year window.
It is worth noting that this period encompassed a number of significant market and macroeconomic events: the 2008‑2009 global financial crisis, the long post-crisis recovery, the COVID‑19 shock in 2020, elevated inflation during the mid-2020s, and multiple interest-rate cycles. Through these varied environments, L3Harris benefited from relatively resilient defense spending as well as secular demand for advanced communications, surveillance, and space technologies.
Another driver of long-term returns has been corporate actions and portfolio repositioning. Harris Corporation and L3 Technologies both pursued targeted acquisitions and divestitures over the years, and the 2019 merger created a larger, more diversified platform. For existing shareholders, the combination was executed via an all-stock transaction, which helped preserve continuity of ownership for long-term investors and gave them ongoing exposure to the combined entity.
Returning to the numbers, the role of dividends is central to the outcome above. Over the past 20 years, L3Harris Technologies Inc has paid $47.91/share in dividends. For the purposes of the analysis summarized in the table, it is assumed that the investor reinvests all dividends back into additional shares of LHX. For these calculations, the reinvestment is performed using the closing price on the ex-dividend date for each dividend.
This reinvestment policy is what allowed the share count to grow from 211.42 shares initially to 318.19 shares by April 2026. The incremental shares acquired via dividends then generated their own dividends, reinforcing the compounding effect. Over long time horizons, this “dividends on dividends” dynamic can materially enhance total return compared with a strategy of simply spending the income as it is received.
Always an important consideration with a dividend-paying company is whether to reinvest or take the cash. For investors in the accumulation phase, reinvestment can be a disciplined mechanism to increase exposure over time without attempting to time the market. For investors who are closer to or in retirement, the decision may instead be driven by income needs, tax circumstances, and portfolio diversification objectives.
Based upon the most recent annualized dividend rate of 5/share, we calculate that LHX has a current yield of approximately 1.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $47.30/share purchase price. This works out to a yield on cost of 2.96%.
In practice, income-focused investors tend to give more weight to current yield than to yield on cost, because the market price at any given time is what determines the opportunity set for new capital. However, yield on cost can still be a useful lens for existing shareholders, as it illustrates how income streams can grow over time relative to the initial outlay, particularly when a company maintains a record of regular dividend increases.
In L3Harris’s case, the company has established itself as a consistent dividend payer and, in recent years, a regular dividend grower. Management has articulated a capital allocation framework that balances organic investment, research and development, return of capital via dividends and buybacks, and selective M&A. That balance has been a key part of the total return profile over the long term, even though the current dividend yield is modest compared with high-yield sectors such as utilities, REITs, or certain midstream energy names.
For investors evaluating LHX today, several fundamental themes may be worth monitoring:
- Defense budget trends in the United States and allied countries, particularly in areas such as space, cyber, and advanced communications.
- The company’s ability to integrate prior acquisitions and deliver targeted cost synergies from the L3 and Harris merger.
- Capital allocation discipline, including the pace of future dividend increases and share repurchases relative to free cash flow.
- Exposure to long-cycle programs versus shorter-cycle, more discretionary spending, which can influence earnings resilience across economic environments.
None of these considerations changes the backward-looking math described above, but they do inform expectations about whether the next 20 years are likely to resemble the past 20 in terms of return profile and risk characteristics.
Ultimately, the L3Harris example illustrates how a combination of business quality, a favorable industry backdrop, consistent dividend payments, and patient reinvestment can translate into substantial long-term wealth creation. As with any individual security, results for future investors will depend on purchase price, holding period, and underlying business performance, and investors should always evaluate such opportunities in the context of a diversified portfolio and their own risk tolerance.
Here’s one more investment quote before you go:
“Price is what you pay. Value is what you get.” — Warren Buffett
