“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 longterm 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 exdate 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