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“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 Bank of New York Mellon Corp (NYSE: BK)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 04/16/2001


End date: 04/13/2021
Start price/share: $52.63
End price/share: $48.34
Starting shares: 190.01
Ending shares: 292.26
Dividends reinvested/share: $15.57
Total return: 41.28%
Average annual return: 1.74%
Starting investment: $10,000.00
Ending investment: $14,121.33

As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 1.74%. This would have turned a $10K investment made 20 years ago into $14,121.33 today (as of 04/13/2021). On a total return basis, that’s a result of 41.28% (something to think about: how might BK shares perform over the next 20 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 $15.57/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 1.24/share, we calculate that BK has a current yield of approximately 2.57%. 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 $52.63/share purchase price. This works out to a yield on cost of 4.88%.

One more piece of investment wisdom to leave you with:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch