“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 2002.
| Start date: | 09/23/2002 |
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| End date: | 09/22/2022 | ||||
| Start price/share: | $24.56 | ||||
| End price/share: | $16.58 | ||||
| Starting shares: | 407.17 | ||||
| Ending shares: | 756.81 | ||||
| Dividends reinvested/share: | $13.13 | ||||
| Total return: | 25.48% | ||||
| Average annual return: | 1.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,546.22 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 1.14%. This would have turned a $10K investment made 20 years ago into $12,546.22 today (as of 09/22/2022). On a total return basis, that’s a result of 25.48% (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 $13.13/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 .78/share, we calculate that KEY has a current yield of approximately 4.70%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .78 against the original $24.56/share purchase price. This works out to a yield on cost of 19.14%.
More investment wisdom to ponder:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
