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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 Ross Stores, Inc. (NASD: ROST), by taking a look at the investment outcome over a five year holding period.

Start date: 06/24/2014


End date: 06/21/2019
Start price/share: $33.38
End price/share: $103.96
Starting shares: 299.58
Ending shares: 314.60
Dividends reinvested/share: $3.26
Total return: 227.06%
Average annual return: 26.78%
Starting investment: $10,000.00
Ending investment: $32,710.64

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 26.78%. This would have turned a $10K investment made 5 years ago into $32,710.64 today (as of 06/21/2019). On a total return basis, that’s a result of 227.06% (something to think about: how might ROST shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ross Stores, Inc. paid investors a total of $3.26/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 1.02/share, we calculate that ROST has a current yield of approximately 0.98%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.02 against the original $33.38/share purchase price. This works out to a yield on cost of 2.94%.

Another great investment quote to think about:
“Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.” — Jim Rogers