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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 two-decade 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 two-decade investment into the stock back in 1999.

Start date: 12/16/1999
$10,000

12/16/1999
$5,700

12/13/2019
End date: 12/13/2019
Start price/share: $53.25
End price/share: $17.62
Starting shares: 187.79
Ending shares: 323.41
Dividends reinvested/share: $13.24
Total return: -43.02%
Average annual return: -2.77%
Starting investment: $10,000.00
Ending investment: $5,700.84

As we can see, the two-decade investment result worked out poorly, with an annualized rate of return of -2.77%. This would have turned a $10K investment made 20 years ago into $5,700.84 today (as of 12/13/2019). On a total return basis, that’s a result of -43.02% (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 $13.24/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 7.04%. 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 $53.25/share purchase price. This works out to a yield on cost of 13.22%.

Here’s one more great investment quote before you go:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra