“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 BB&T Corp. (NYSE: BBT)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 11/08/1999 |
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| End date: | 11/07/2019 | ||||
| Start price/share: | $36.94 | ||||
| End price/share: | $54.73 | ||||
| Starting shares: | 270.73 | ||||
| Ending shares: | 535.10 | ||||
| Dividends reinvested/share: | $23.96 | ||||
| Total return: | 192.86% | ||||
| Average annual return: | 5.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,305.65 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 5.52%. This would have turned a $10K investment made 20 years ago into $29,305.65 today (as of 11/07/2019). On a total return basis, that’s a result of 192.86% (something to think about: how might BBT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that BB&T Corp. paid investors a total of $23.96/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 1.8/share, we calculate that BBT has a current yield of approximately 3.29%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $36.94/share purchase price. This works out to a yield on cost of 8.91%.
One more investment quote to leave you with:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
