“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 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 Comerica, Inc. (NYSE: CMA)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 01/18/2000 |
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| End date: | 01/16/2020 | ||||
| Start price/share: | $43.06 | ||||
| End price/share: | $68.24 | ||||
| Starting shares: | 232.22 | ||||
| Ending shares: | 412.60 | ||||
| Dividends reinvested/share: | $28.99 | ||||
| Total return: | 181.56% | ||||
| Average annual return: | 5.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $28,156.39 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 5.31%. This would have turned a $10K investment made 20 years ago into $28,156.39 today (as of 01/16/2020). On a total return basis, that’s a result of 181.56% (something to think about: how might CMA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Comerica, Inc. paid investors a total of $28.99/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 2.68/share, we calculate that CMA has a current yield of approximately 3.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.68 against the original $43.06/share purchase price. This works out to a yield on cost of 9.13%.
One more piece of investment wisdom to leave you with:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
