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“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 Bristol-Myers Squibb Co. (NYSE: BMY)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.

Start date: 07/10/2000


End date: 07/07/2020
Start price/share: $55.98
End price/share: $60.29
Starting shares: 178.64
Ending shares: 377.18
Dividends reinvested/share: $26.44
Total return: 127.40%
Average annual return: 4.19%
Starting investment: $10,000.00
Ending investment: $22,730.99

The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 4.19%. This would have turned a $10K investment made 20 years ago into $22,730.99 today (as of 07/07/2020). On a total return basis, that’s a result of 127.40% (something to think about: how might BMY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Bristol-Myers Squibb Co. paid investors a total of $26.44/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 BMY has a current yield of approximately 2.99%. 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 $55.98/share purchase price. This works out to a yield on cost of 5.34%.

More investment wisdom to ponder:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros