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“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 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 State Street Corp. (NYSE: STT)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.

Start date: 10/30/2003


End date: 10/27/2023
Start price/share: $52.16
End price/share: $62.93
Starting shares: 191.72
Ending shares: 279.31
Dividends reinvested/share: $24.57
Total return: 75.77%
Average annual return: 2.86%
Starting investment: $10,000.00
Ending investment: $17,577.78

As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 2.86%. This would have turned a $10K investment made 20 years ago into $17,577.78 today (as of 10/27/2023). On a total return basis, that’s a result of 75.77% (something to think about: how might STT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that State Street Corp. paid investors a total of $24.57/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 2.76/share, we calculate that STT has a current yield of approximately 4.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.76 against the original $52.16/share purchase price. This works out to a yield on cost of 8.42%.

More investment wisdom to ponder:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman