“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 quote above is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five-year period, and how will that translate into shareholder returns?
Northern Trust Corp (NASD: NTRS) is a large U.S.-based financial services company focused on asset servicing, asset management, and wealth management for institutional and high-net-worth clients. Founded in 1889 and headquartered in Chicago, Northern Trust is widely regarded as a conservatively run trust and custody bank, and has long emphasized balance sheet strength, risk management, and steady capital return to shareholders via dividends and share repurchases.
Today, we look backwards in time to 2021 and examine what happened to investors who took Buffett’s five-year view with Northern Trust, by reviewing the investment outcome over a full five-year holding period.
| Start date: | 03/18/2021 |
|
|||
| End date: | 03/17/2026 | ||||
| Start price/share: | $104.06 | ||||
| End price/share: | $136.79 | ||||
| Starting shares: | 96.10 | ||||
| Ending shares: | 111.80 | ||||
| Dividends reinvested/share: | $14.90 | ||||
| Total return: | 52.93% | ||||
| Average annual return: | 8.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,294.71 | ||||
As shown above, the five-year investment result for Northern Trust worked out well, with an annualized rate of return of 8.87%. That performance would have turned a hypothetical $10,000 investment made five years ago into $15,294.71 today (as of 03/17/2026). On a total return basis, that represents a gain of 52.93% over the period.
For context, this five-year window spanned a highly unusual macro environment for financial institutions: the tail end of the COVID-19 crisis, a sharp move higher in short- and long-term interest rates, bouts of market volatility in 2022‑2023, and ongoing regulatory scrutiny of bank capital and liquidity. Northern Trust’s business model is sensitive to both equity market levels (via fee-based assets under custody and management) and interest rate differentials (via net interest income on client deposits). The fact that NTRS delivered a mid-to-high single-digit annualized total return across this backdrop underscores the resilience of its fee-heavy business mix and conservative balance sheet management.
Of course, the past five years are now in the books. The more relevant question for today’s investor is how NTRS shares might perform over the next five years, recognizing that future returns will depend on factors such as equity market performance, interest rate policy from the Federal Reserve, competitive dynamics in global custody and asset management, and any changes to capital and liquidity rules affecting trust banks.
[These performance figures were computed with the Dividend Channel DRIP Returns Calculator.]
The role of dividends in total return
Dividends are always an important investment factor to consider, and Northern Trust Corp has paid $14.90 per share in dividends to shareholders over the five-year period reviewed above. Many investors will only invest in stocks that pay dividends, so this component of total return is always an important consideration, particularly in financials where dividends are often a key component of shareholder yield.
Northern Trust has an established record of paying and regularly increasing its dividend. The company maintained its dividend through the pandemic period, and has historically targeted a payout ratio consistent with preserving capital while still returning cash to shareholders. For investors seeking income in addition to potential capital appreciation, this profile can be attractive relative to non-dividend-paying financials or more cyclical bank names.
Automated reinvestment of dividends into additional shares of stock can be a powerful way for an investor to compound their returns over multi-year holding periods. In the illustration above, dividends were assumed to be reinvested via a dividend reinvestment plan (DRIP). Over five years, those reinvested cash flows increased the investor’s share count from 96.10 shares initially to 111.80 shares at the end of the period, magnifying the benefit of subsequent price appreciation.
The above calculations are done with the assumption that dividends received over time are reinvested (the calculations use the closing price on the ex-dividend date). In practice, investors may choose to take dividends in cash rather than reinvesting, in which case their ending share count would be lower and the total return profile would differ accordingly.
Current dividend yield and yield on cost
Based upon the most recent annualized dividend rate of 3.2 per share, we calculate that NTRS has a current yield of approximately 2.34%. Another useful data point to examine is “yield on cost” — in other words, we can express the current annualized dividend of 3.2 against the original $104.06 per share purchase price. This works out to a yield on cost of 2.25% for the investor who initiated the position in March 2021.
While a 2‑3% yield may not be high enough on its own to satisfy dedicated income investors, it is important to view the dividend in conjunction with Northern Trust’s potential for long-term earnings growth, the stability of its fee-based revenue streams, and its history of periodic dividend increases over time. For many total-return oriented investors, a combination of a modest but reliable yield plus earnings- and valuation-driven price appreciation can provide a balanced risk/return profile.
Risk and portfolio considerations
As with any financial stock, Northern Trust is subject to risks including changes in interest rates, market volatility that affects assets under management and custody, competitive pressure on fees, regulatory changes, and credit and operational risks. However, relative to more traditional commercial banks with large loan books and higher credit exposure, trust and custody banks like Northern Trust typically exhibit more fee-driven revenue and lower credit risk, albeit with higher sensitivity to capital markets and institutional client activity.
For diversified, long-term investors, NTRS may serve as an allocation to the asset and wealth management ecosystem, with an overlay of interest-rate sensitivity and a consistent dividend stream. As always, investors should consider Northern Trust’s role within the broader portfolio, risk tolerance, and investment objectives before committing capital, and should complement historical return analysis with up-to-date fundamental research, earnings trends, and valuation metrics.
Here’s one more investment quote before you go:
“The person who starts simply with the idea of getting rich won’t succeed; you must have a larger ambition.” — John Rockefeller
