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“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 Jefferies Group Inc. (NYSE: JEF)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 03/28/2014


End date: 03/27/2019
Start price/share: $27.28
End price/share: $18.70
Starting shares: 366.57
Ending shares: 393.93
Dividends reinvested/share: $1.59
Total return: -26.33%
Average annual return: -5.93%
Starting investment: $10,000.00
Ending investment: $7,366.41

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -5.93%. This would have turned a $10K investment made 5 years ago into $7,366.41 today (as of 03/27/2019). On a total return basis, that’s a result of -26.33% (something to think about: how might JEF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Jefferies Group Inc. paid investors a total of $1.59/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 .5/share, we calculate that JEF has a current yield of approximately 2.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $27.28/share purchase price. This works out to a yield on cost of 9.79%.

One more investment quote to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott