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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 TE Connectivity Ltd (NYSE: TEL)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 03/20/2015


End date: 03/19/2020
Start price/share: $73.42
End price/share: $54.60
Starting shares: 136.20
Ending shares: 150.99
Dividends reinvested/share: $8.00
Total return: -17.56%
Average annual return: -3.79%
Starting investment: $10,000.00
Ending investment: $8,242.43

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -3.79%. This would have turned a $10K investment made 5 years ago into $8,242.43 today (as of 03/19/2020). On a total return basis, that’s a result of -17.56% (something to think about: how might TEL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that TE Connectivity Ltd paid investors a total of $8.00/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 1.84/share, we calculate that TEL has a current yield of approximately 3.37%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.84 against the original $73.42/share purchase price. This works out to a yield on cost of 4.59%.

One more piece of investment wisdom to leave you with:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman