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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 SunTrust Banks Inc (NYSE: STI)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 06/16/2014


End date: 06/13/2019
Start price/share: $39.85
End price/share: $64.07
Starting shares: 250.94
Ending shares: 283.18
Dividends reinvested/share: $6.44
Total return: 81.43%
Average annual return: 12.67%
Starting investment: $10,000.00
Ending investment: $18,145.03

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 12.67%. This would have turned a $10K investment made 5 years ago into $18,145.03 today (as of 06/13/2019). On a total return basis, that’s a result of 81.43% (something to think about: how might STI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that SunTrust Banks Inc paid investors a total of $6.44/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 2/share, we calculate that STI has a current yield of approximately 3.12%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $39.85/share purchase price. This works out to a yield on cost of 7.83%.

Here’s one more great investment quote before you go:
“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part-ownership of a business.” — Peter Lynch