“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 Leggett & Platt, Inc. (NYSE: LEG)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 04/28/2014 |
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| End date: | 04/25/2019 | ||||
| Start price/share: | $32.50 | ||||
| End price/share: | $41.69 | ||||
| Starting shares: | 307.69 | ||||
| Ending shares: | 358.64 | ||||
| Dividends reinvested/share: | $6.82 | ||||
| Total return: | 49.52% | ||||
| Average annual return: | 8.39% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,953.90 | ||||
As we can see, the five year investment result worked out well, with an annualized rate of return of 8.39%. This would have turned a $10K investment made 5 years ago into $14,953.90 today (as of 04/25/2019). On a total return basis, that’s a result of 49.52% (something to think about: how might LEG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Leggett & Platt, Inc. paid investors a total of $6.82/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 1.52/share, we calculate that LEG has a current yield of approximately 3.65%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.52 against the original $32.50/share purchase price. This works out to a yield on cost of 11.23%.
One more piece of investment wisdom to leave you with:
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” — Oscar Wilde
