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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 Allergan PLC (NYSE: AGN)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 05/12/2014


End date: 05/09/2019
Start price/share: $203.19
End price/share: $140.26
Starting shares: 49.22
Ending shares: 51.00
Dividends reinvested/share: $6.42
Total return: -28.47%
Average annual return: -6.49%
Starting investment: $10,000.00
Ending investment: $7,152.37

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -6.49%. This would have turned a $10K investment made 5 years ago into $7,152.37 today (as of 05/09/2019). On a total return basis, that’s a result of -28.47% (something to think about: how might AGN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Allergan PLC paid investors a total of $6.42/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 2.96/share, we calculate that AGN has a current yield of approximately 2.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.96 against the original $203.19/share purchase price. This works out to a yield on cost of 1.04%.

One more investment quote to leave you with:
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer