“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 KeyCorp (NYSE: KEY)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 08/09/2001 |
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| End date: | 08/06/2021 | ||||
| Start price/share: | $27.79 | ||||
| End price/share: | $20.33 | ||||
| Starting shares: | 359.84 | ||||
| Ending shares: | 676.88 | ||||
| Dividends reinvested/share: | $13.65 | ||||
| Total return: | 37.61% | ||||
| Average annual return: | 1.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,764.71 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 1.61%. This would have turned a $10K investment made 20 years ago into $13,764.71 today (as of 08/06/2021). On a total return basis, that’s a result of 37.61% (something to think about: how might KEY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that KeyCorp paid investors a total of $13.65/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 .74/share, we calculate that KEY has a current yield of approximately 3.64%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .74 against the original $27.79/share purchase price. This works out to a yield on cost of 13.10%.
One more piece of investment wisdom to leave you with:
“The function of economic forecasting is to make astrology look respectable.” — John Galbraith
