“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 M & T Bank Corp (NYSE: MTB)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 09/13/2004 |
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| End date: | 09/11/2024 | ||||
| Start price/share: | $95.96 | ||||
| End price/share: | $165.89 | ||||
| Starting shares: | 104.21 | ||||
| Ending shares: | 185.76 | ||||
| Dividends reinvested/share: | $65.75 | ||||
| Total return: | 208.15% | ||||
| Average annual return: | 5.79% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $30,838.50 | ||||
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 5.79%. This would have turned a $10K investment made 20 years ago into $30,838.50 today (as of 09/11/2024). On a total return basis, that’s a result of 208.15% (something to think about: how might MTB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that M & T Bank Corp paid investors a total of $65.75/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 5.4/share, we calculate that MTB has a current yield of approximately 3.26%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.4 against the original $95.96/share purchase price. This works out to a yield on cost of 3.40%.
One more piece of investment wisdom to leave you with:
“The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.” — Michael Milken
