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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 Perrigo Company plc (NYSE: PRGO)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 05/15/2014


End date: 05/14/2019
Start price/share: $132.37
End price/share: $49.70
Starting shares: 75.55
Ending shares: 78.13
Dividends reinvested/share: $2.98
Total return: -61.17%
Average annual return: -17.24%
Starting investment: $10,000.00
Ending investment: $3,882.42

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -17.24%. This would have turned a $10K investment made 5 years ago into $3,882.42 today (as of 05/14/2019). On a total return basis, that’s a result of -61.17% (something to think about: how might PRGO shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Perrigo Company plc paid investors a total of $2.98/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 .84/share, we calculate that PRGO has a current yield of approximately 1.69%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $132.37/share purchase price. This works out to a yield on cost of 1.28%.

More investment wisdom to ponder:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham