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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 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
$10,000

05/27/2014
$10,861

05/23/2019
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