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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five 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 five year investment into the stock back in 2015.

Start date: 12/24/2015


End date: 12/23/2020
Start price/share: $41.23
End price/share: $40.98
Starting shares: 242.54
Ending shares: 271.24
Dividends reinvested/share: $5.04
Total return: 11.15%
Average annual return: 2.14%
Starting investment: $10,000.00
Ending investment: $11,117.43

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 2.14%. This would have turned a $10K investment made 5 years ago into $11,117.43 today (as of 12/23/2020). On a total return basis, that’s a result of 11.15% (something to think about: how might BK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Bank of New York Mellon Corp paid investors a total of $5.04/share in dividends over the 5 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 BK has a current yield of approximately 3.03%. 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 $41.23/share purchase price. This works out to a yield on cost of 7.35%.

One more investment quote to leave you with:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett