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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 above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Harris Corp. (NYSE: HRS), by taking a look at the investment outcome over a five year holding period.

Start date: 06/10/2014
$10,000

06/10/2014
$28,396

06/07/2019
End date: 06/07/2019
Start price/share: $77.46
End price/share: $198.21
Starting shares: 129.10
Ending shares: 143.25
Dividends reinvested/share: $11.02
Total return: 183.94%
Average annual return: 23.24%
Starting investment: $10,000.00
Ending investment: $28,396.26

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 23.24%. This would have turned a $10K investment made 5 years ago into $28,396.26 today (as of 06/07/2019). On a total return basis, that’s a result of 183.94% (something to think about: how might HRS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Harris Corp. paid investors a total of $11.02/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 2.74/share, we calculate that HRS has a current yield of approximately 1.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.74 against the original $77.46/share purchase price. This works out to a yield on cost of 1.78%.

One more investment quote to leave you with:
“Wide diversification is only required when investors do not understand what they are doing.” — Warren Buffett