“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 Corning Inc (NYSE: GLW)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 12/10/2014 |
|
|||
| End date: | 12/09/2019 | ||||
| Start price/share: | $21.15 | ||||
| End price/share: | $28.51 | ||||
| Starting shares: | 472.81 | ||||
| Ending shares: | 533.83 | ||||
| Dividends reinvested/share: | $3.16 | ||||
| Total return: | 52.20% | ||||
| Average annual return: | 8.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,217.59 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 8.76%. This would have turned a $10K investment made 5 years ago into $15,217.59 today (as of 12/09/2019). On a total return basis, that’s a result of 52.20% (something to think about: how might GLW shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Corning Inc paid investors a total of $3.16/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 .8/share, we calculate that GLW has a current yield of approximately 2.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $21.15/share purchase price. This works out to a yield on cost of 13.29%.
One more piece of investment wisdom to leave you with:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
