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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Fifth Third Bancorp (NASD: FITB) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 05/09/2014


End date: 05/08/2019
Start price/share: $20.55
End price/share: $27.74
Starting shares: 486.62
Ending shares: 554.03
Dividends reinvested/share: $3.00
Total return: 53.69%
Average annual return: 8.98%
Starting investment: $10,000.00
Ending investment: $15,372.13

The above analysis shows the five year investment result worked out well, with an annualized rate of return of 8.98%. This would have turned a $10K investment made 5 years ago into $15,372.13 today (as of 05/08/2019). On a total return basis, that’s a result of 53.69% (something to think about: how might FITB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Fifth Third Bancorp paid investors a total of $3.00/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 .88/share, we calculate that FITB has a current yield of approximately 3.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .88 against the original $20.55/share purchase price. This works out to a yield on cost of 15.43%.

More investment wisdom to ponder:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett