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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Invesco Ltd (NYSE: IVZ)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 05/21/1999
$10,000

05/21/1999
$7,095

05/20/2019
End date: 05/20/2019
Start price/share: $48.62
End price/share: $20.65
Starting shares: 205.66
Ending shares: 343.70
Dividends reinvested/share: $12.93
Total return: -29.03%
Average annual return: -1.70%
Starting investment: $10,000.00
Ending investment: $7,095.59

As we can see, the twenty year investment result worked out poorly, with an annualized rate of return of -1.70%. This would have turned a $10K investment made 20 years ago into $7,095.59 today (as of 05/20/2019). On a total return basis, that’s a result of -29.03% (something to think about: how might IVZ shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Invesco Ltd paid investors a total of $12.93/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 1.24/share, we calculate that IVZ has a current yield of approximately 6.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.24 against the original $48.62/share purchase price. This works out to a yield on cost of 12.34%.

Another great investment quote to think about:
“An investment in knowledge pays the best interest.” — Benjamin Franklin