“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 Crown Castle International Corp (NYSE: CCI), by taking a look at the investment outcome over a five year holding period.
| Start date: | 10/14/2014 |
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| End date: | 10/11/2019 | ||||
| Start price/share: | $80.80 | ||||
| End price/share: | $136.68 | ||||
| Starting shares: | 123.76 | ||||
| Ending shares: | 150.24 | ||||
| Dividends reinvested/share: | $19.32 | ||||
| Total return: | 105.34% | ||||
| Average annual return: | 15.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,538.42 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 15.50%. This would have turned a $10K investment made 5 years ago into $20,538.42 today (as of 10/11/2019). On a total return basis, that’s a result of 105.34% (something to think about: how might CCI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Crown Castle International Corp paid investors a total of $19.32/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).
Another great investment quote to think about:
“The most important three words in investing is: “I don’t know.†If someone doesn’t say that to you then they are lying.” — James Altucher
