“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 KeyCorp (NYSE: KEY)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 11/04/2002 |
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| End date: | 11/01/2022 | ||||
| Start price/share: | $24.98 | ||||
| End price/share: | $18.05 | ||||
| Starting shares: | 400.32 | ||||
| Ending shares: | 744.08 | ||||
| Dividends reinvested/share: | $13.13 | ||||
| Total return: | 34.31% | ||||
| Average annual return: | 1.49% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,442.58 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 1.49%. This would have turned a $10K investment made 20 years ago into $13,442.58 today (as of 11/01/2022). On a total return basis, that’s a result of 34.31% (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 4.32%. 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 $24.98/share purchase price. This works out to a yield on cost of 17.29%.
Here’s one more great investment quote before you go:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John
