“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 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 Bristol Myers Squibb Co. (NYSE: BMY)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 03/09/2001 |
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| End date: | 03/08/2021 | ||||
| Start price/share: | $60.15 | ||||
| End price/share: | $60.45 | ||||
| Starting shares: | 166.25 | ||||
| Ending shares: | 353.45 | ||||
| Dividends reinvested/share: | $26.89 | ||||
| Total return: | 113.66% | ||||
| Average annual return: | 3.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $21,378.80 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 3.87%. This would have turned a $10K investment made 20 years ago into $21,378.80 today (as of 03/08/2021). On a total return basis, that’s a result of 113.66% (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 $26.89/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 1.96/share, we calculate that BMY has a current yield of approximately 3.24%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.96 against the original $60.15/share purchase price. This works out to a yield on cost of 5.39%.
Another great investment quote to think about:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
