“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 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 Bristol Myers Squibb Co. (NYSE: BMY)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 08/31/2001 |
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| End date: | 08/30/2021 | ||||
| Start price/share: | $56.14 | ||||
| End price/share: | $67.21 | ||||
| Starting shares: | 178.13 | ||||
| Ending shares: | 380.63 | ||||
| Dividends reinvested/share: | $27.34 | ||||
| Total return: | 155.82% | ||||
| Average annual return: | 4.81% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,602.24 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 4.81%. This would have turned a $10K investment made 20 years ago into $25,602.24 today (as of 08/30/2021). On a total return basis, that’s a result of 155.82% (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 $27.34/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 2.92%. 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 $56.14/share purchase price. This works out to a yield on cost of 5.20%.
Here’s one more great investment quote before you go:
“When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.” — Victor Niederhoffer
