“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 J.M. Smucker Co. (NYSE: SJM)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 03/11/2014 |
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| End date: | 03/08/2019 | ||||
| Start price/share: | $96.55 | ||||
| End price/share: | $102.49 | ||||
| Starting shares: | 103.57 | ||||
| Ending shares: | 117.31 | ||||
| Dividends reinvested/share: | $14.49 | ||||
| Total return: | 20.23% | ||||
| Average annual return: | 3.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,024.36 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.76%. This would have turned a $10K investment made 5 years ago into $12,024.36 today (as of 03/08/2019). On a total return basis, that’s a result of 20.23% (something to think about: how might SJM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that J.M. Smucker Co. paid investors a total of $14.49/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 3.4/share, we calculate that SJM has a current yield of approximately 3.32%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.4 against the original $96.55/share purchase price. This works out to a yield on cost of 3.44%.
One more investment quote to leave you with:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.” — Muriel Siebert
