Photo credit:

“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 America Corp (NYSE: BAC)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.

Start date: 02/04/2002


End date: 02/02/2022
Start price/share: $29.70
End price/share: $46.89
Starting shares: 336.70
Ending shares: 543.82
Dividends reinvested/share: $16.88
Total return: 155.00%
Average annual return: 4.79%
Starting investment: $10,000.00
Ending investment: $25,501.39

As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 4.79%. This would have turned a $10K investment made 20 years ago into $25,501.39 today (as of 02/02/2022). On a total return basis, that’s a result of 155.00% (something to think about: how might BAC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Bank of America Corp paid investors a total of $16.88/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 .84/share, we calculate that BAC has a current yield of approximately 1.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $29.70/share purchase price. This works out to a yield on cost of 6.03%.

One more piece of investment wisdom to leave you with:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch