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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 Bank of New York Mellon Corp (NYSE: BK)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.

Start date: 11/10/2003


End date: 11/08/2023
Start price/share: $33.00
End price/share: $44.97
Starting shares: 303.03
Ending shares: 478.66
Dividends reinvested/share: $17.58
Total return: 115.26%
Average annual return: 3.91%
Starting investment: $10,000.00
Ending investment: $21,541.89

As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 3.91%. This would have turned a $10K investment made 20 years ago into $21,541.89 today (as of 11/08/2023). On a total return basis, that’s a result of 115.26% (something to think about: how might BK shares perform over the next 20 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 $17.58/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 1.68/share, we calculate that BK has a current yield of approximately 3.74%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $33.00/share purchase price. This works out to a yield on cost of 11.33%.

More investment wisdom to ponder:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham