“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into State Street Corp. (NYSE: STT)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 07/06/2009 |
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| End date: | 07/02/2019 | ||||
| Start price/share: | $46.59 | ||||
| End price/share: | $55.82 | ||||
| Starting shares: | 214.64 | ||||
| Ending shares: | 253.27 | ||||
| Dividends reinvested/share: | $10.76 | ||||
| Total return: | 41.38% | ||||
| Average annual return: | 3.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,144.24 | ||||
As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 3.53%. This would have turned a $10K investment made 10 years ago into $14,144.24 today (as of 07/02/2019). On a total return basis, that’s a result of 41.38% (something to think about: how might STT shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that State Street Corp. paid investors a total of $10.76/share in dividends over the 10 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 1.88/share, we calculate that STT has a current yield of approximately 3.37%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.88 against the original $46.59/share purchase price. This works out to a yield on cost of 7.23%.
More investment wisdom to ponder:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
