“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 Franklin Resources Inc (NYSE: BEN)? 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: | 09/12/2024 | ||||
| Start price/share: | $18.38 | ||||
| End price/share: | $19.67 | ||||
| Starting shares: | 544.07 | ||||
| Ending shares: | 972.11 | ||||
| Dividends reinvested/share: | $18.33 | ||||
| Total return: | 91.21% | ||||
| Average annual return: | 3.29% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,112.59 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 3.29%. This would have turned a $10K investment made 20 years ago into $19,112.59 today (as of 09/12/2024). On a total return basis, that’s a result of 91.21% (something to think about: how might BEN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Franklin Resources Inc paid investors a total of $18.33/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 1.24/share, we calculate that BEN has a current yield of approximately 6.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.24 against the original $18.38/share purchase price. This works out to a yield on cost of 34.28%.
One more piece of investment wisdom to leave you with:
“Know what you own and why you own it.” — Peter Lynch
