“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Bristol Myers Squibb Co. (NYSE: BMY)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 03/07/2019 |
|
|||
| End date: | 03/06/2024 | ||||
| Start price/share: | $51.51 | ||||
| End price/share: | $53.38 | ||||
| Starting shares: | 194.14 | ||||
| Ending shares: | 228.81 | ||||
| Dividends reinvested/share: | $10.03 | ||||
| Total return: | 22.14% | ||||
| Average annual return: | 4.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,214.73 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 4.08%. This would have turned a $10K investment made 5 years ago into $12,214.73 today (as of 03/06/2024). On a total return basis, that’s a result of 22.14% (something to think about: how might BMY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Bristol Myers Squibb Co. paid investors a total of $10.03/share in dividends over the 5 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 2.4/share, we calculate that BMY has a current yield of approximately 4.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $51.51/share purchase price. This works out to a yield on cost of 8.74%.
Here’s one more great investment quote before you go:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
