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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 Hartford Financial Services Group Inc. (NYSE: HIG), by taking a look at the investment outcome over a five year holding period.

Start date: 06/03/2014
$10,000

06/03/2014
$16,420

05/31/2019
End date: 05/31/2019
Start price/share: $35.39
End price/share: $52.66
Starting shares: 282.57
Ending shares: 311.82
Dividends reinvested/share: $4.64
Total return: 64.20%
Average annual return: 10.44%
Starting investment: $10,000.00
Ending investment: $16,420.85

As we can see, the five year investment result worked out quite well, with an annualized rate of return of 10.44%. This would have turned a $10K investment made 5 years ago into $16,420.85 today (as of 05/31/2019). On a total return basis, that’s a result of 64.20% (something to think about: how might HIG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Hartford Financial Services Group Inc. paid investors a total of $4.64/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 1.2/share, we calculate that HIG has a current yield of approximately 2.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $35.39/share purchase price. This works out to a yield on cost of 6.44%.

One more piece of investment wisdom to leave you with:
“It’s not how much money you make, but how much money you keep.” — Robert Kiyosaki