“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 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 Bank of New York Mellon Corp (NYSE: BK)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.
| Start date: | 12/22/2003 |
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| End date: | 12/19/2023 | ||||
| Start price/share: | $34.84 | ||||
| End price/share: | $51.71 | ||||
| Starting shares: | 287.03 | ||||
| Ending shares: | 453.38 | ||||
| Dividends reinvested/share: | $17.58 | ||||
| Total return: | 134.44% | ||||
| Average annual return: | 4.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,439.61 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.35%. This would have turned a $10K investment made 20 years ago into $23,439.61 today (as of 12/19/2023). On a total return basis, that’s a result of 134.44% (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 3.25%. 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 $34.84/share purchase price. This works out to a yield on cost of 9.33%.
One more piece of investment wisdom to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
