“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Bank of New York Mellon Corp (NYSE: BK)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 09/17/1999 |
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| End date: | 09/16/2019 | ||||
| Start price/share: | $37.36 | ||||
| End price/share: | $46.75 | ||||
| Starting shares: | 267.67 | ||||
| Ending shares: | 401.64 | ||||
| Dividends reinvested/share: | $14.74 | ||||
| Total return: | 87.77% | ||||
| Average annual return: | 3.20% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,782.09 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 3.20%. This would have turned a $10K investment made 20 years ago into $18,782.09 today (as of 09/16/2019). On a total return basis, that’s a result of 87.77% (something to think about: how might BK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 20 years, Bank of New York Mellon Corp has paid $14.74/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of 1.24/share, we calculate that BK has a current yield of approximately 2.65%. 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 $37.36/share purchase price. This works out to a yield on cost of 7.09%.
One more piece of investment wisdom to leave you with:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman
