Photo credit:

“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


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