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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a decade-long holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Bank of New York Mellon Corp (NYSE: BK) back in 2012: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full decade-long investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 11/05/2012


End date: 11/02/2022
Start price/share: $25.11
End price/share: $42.04
Starting shares: 398.25
Ending shares: 498.48
Dividends reinvested/share: $9.68
Total return: 109.56%
Average annual return: 7.68%
Starting investment: $10,000.00
Ending investment: $20,949.53

As we can see, the decade-long investment result worked out well, with an annualized rate of return of 7.68%. This would have turned a $10K investment made 10 years ago into $20,949.53 today (as of 11/02/2022). On a total return basis, that’s a result of 109.56% (something to think about: how might BK shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Bank of New York Mellon Corp paid investors a total of $9.68/share in dividends over the 10 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 1.48/share, we calculate that BK has a current yield of approximately 3.52%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $25.11/share purchase price. This works out to a yield on cost of 14.02%.

One more piece of investment wisdom to leave you with:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil