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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2014, investors considering an investment into shares of L3Harris Technologies Inc (NYSE: LHX) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 07/08/2014


End date: 07/05/2019
Start price/share: $73.40
End price/share: $184.96
Starting shares: 136.24
Ending shares: 151.18
Dividends reinvested/share: $11.02
Total return: 179.62%
Average annual return: 22.86%
Starting investment: $10,000.00
Ending investment: $27,961.64

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 22.86%. This would have turned a $10K investment made 5 years ago into $27,961.64 today (as of 07/05/2019). On a total return basis, that’s a result of 179.62% (something to think about: how might LHX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that L3Harris Technologies Inc 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 LHX has a current yield of approximately 1.48%. 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 $73.40/share purchase price. This works out to a yield on cost of 2.02%.

One more piece of investment wisdom to leave you with:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros