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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 Franklin Resources, Inc. (NYSE: BEN)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 05/02/2014


End date: 05/01/2019
Start price/share: $52.95
End price/share: $34.04
Starting shares: 188.86
Ending shares: 228.81
Dividends reinvested/share: $7.30
Total return: -22.11%
Average annual return: -4.88%
Starting investment: $10,000.00
Ending investment: $7,786.80

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -4.88%. This would have turned a $10K investment made 5 years ago into $7,786.80 today (as of 05/01/2019). On a total return basis, that’s a result of -22.11% (something to think about: how might BEN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Franklin Resources, Inc. paid investors a total of $7.30/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 1.04/share, we calculate that BEN has a current yield of approximately 3.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $52.95/share purchase price. This works out to a yield on cost of 5.78%.

Another great investment quote to think about:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt