“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 M & T Bank Corp (NYSE: MTB)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 04/30/2001 |
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| End date: | 04/27/2021 | ||||
| Start price/share: | $71.55 | ||||
| End price/share: | $156.78 | ||||
| Starting shares: | 139.76 | ||||
| Ending shares: | 233.31 | ||||
| Dividends reinvested/share: | $52.55 | ||||
| Total return: | 265.78% | ||||
| Average annual return: | 6.70% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $36,596.77 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 6.70%. This would have turned a $10K investment made 20 years ago into $36,596.77 today (as of 04/27/2021). On a total return basis, that’s a result of 265.78% (something to think about: how might MTB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that M & T Bank Corp paid investors a total of $52.55/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 4.4/share, we calculate that MTB has a current yield of approximately 2.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $71.55/share purchase price. This works out to a yield on cost of 3.93%.
Here’s one more great investment quote before you go:
“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett
