“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 H & R Block, Inc. (NYSE: HRB)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 05/27/2014 |
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| End date: | 05/23/2019 | ||||
| Start price/share: | $29.47 | ||||
| End price/share: | $27.22 | ||||
| Starting shares: | 339.33 | ||||
| Ending shares: | 398.95 | ||||
| Dividends reinvested/share: | $4.44 | ||||
| Total return: | 8.59% | ||||
| Average annual return: | 1.67% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,861.88 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 1.67%. This would have turned a $10K investment made 5 years ago into $10,861.88 today (as of 05/23/2019). On a total return basis, that’s a result of 8.59% (something to think about: how might HRB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that H & R Block, Inc. paid investors a total of $4.44/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/share, we calculate that HRB has a current yield of approximately 3.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $29.47/share purchase price. This works out to a yield on cost of 12.45%.
Another great investment quote to think about:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather
