“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into M & T Bank Corp (NYSE: MTB)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 04/30/2014 |
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| End date: | 04/29/2019 | ||||
| Start price/share: | $122.01 | ||||
| End price/share: | $170.64 | ||||
| Starting shares: | 81.96 | ||||
| Ending shares: | 91.27 | ||||
| Dividends reinvested/share: | $15.25 | ||||
| Total return: | 55.75% | ||||
| Average annual return: | 9.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,577.75 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 9.27%. This would have turned a $10K investment made 5 years ago into $15,577.75 today (as of 04/29/2019). On a total return basis, that’s a result of 55.75% (something to think about: how might MTB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that M & T Bank Corp paid investors a total of $15.25/share in dividends over the 5 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 4/share, we calculate that MTB has a current yield of approximately 2.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4 against the original $122.01/share purchase price. This works out to a yield on cost of 1.92%.
More investment wisdom to ponder:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
