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

Start date: 12/22/2003


End date: 12/20/2023
Start price/share: $39.53
End price/share: $32.98
Starting shares: 252.97
Ending shares: 400.39
Dividends reinvested/share: $16.00
Total return: 32.05%
Average annual return: 1.40%
Starting investment: $10,000.00
Ending investment: $13,207.14

As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 1.40%. This would have turned a $10K investment made 20 years ago into $13,207.14 today (as of 12/20/2023). On a total return basis, that’s a result of 32.05% (something to think about: how might BAC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Bank of America Corp paid investors a total of $16.00/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 .96/share, we calculate that BAC has a current yield of approximately 2.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .96 against the original $39.53/share purchase price. This works out to a yield on cost of 7.36%.

One more investment quote to leave you with:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett