“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 Intuit Inc (NASD: INTU)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 10/16/2014 |
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| End date: | 10/15/2019 | ||||
| Start price/share: | $78.64 | ||||
| End price/share: | $273.50 | ||||
| Starting shares: | 127.16 | ||||
| Ending shares: | 133.75 | ||||
| Dividends reinvested/share: | $7.28 | ||||
| Total return: | 265.80% | ||||
| Average annual return: | 29.61% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $36,575.69 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 29.61%. This would have turned a $10K investment made 5 years ago into $36,575.69 today (as of 10/15/2019). On a total return basis, that’s a result of 265.80% (something to think about: how might INTU shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Intuit Inc paid investors a total of $7.28/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 2.12/share, we calculate that INTU has a current yield of approximately 0.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.12 against the original $78.64/share purchase price. This works out to a yield on cost of 0.99%.
Here’s one more great investment quote before you go:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
