“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 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 2001.
| Start date: | 03/26/2001 |
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| End date: | 03/25/2021 | ||||
| Start price/share: | $58.79 | ||||
| End price/share: | $69.97 | ||||
| Starting shares: | 170.10 | ||||
| Ending shares: | 312.78 | ||||
| Dividends reinvested/share: | $30.35 | ||||
| Total return: | 118.86% | ||||
| Average annual return: | 3.99% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $21,876.17 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 3.99%. This would have turned a $10K investment made 20 years ago into $21,876.17 today (as of 03/25/2021). On a total return basis, that’s a result of 118.86% (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 $30.35/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 2.72/share, we calculate that CMA has a current yield of approximately 3.89%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.72 against the original $58.79/share purchase price. This works out to a yield on cost of 6.62%.
Here’s one more great investment quote before you go:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
