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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 Franklin Resources Inc (NYSE: BEN)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 03/09/2015
$10,000

03/09/2015
$4,977

03/06/2020
End date: 03/06/2020
Start price/share: $53.30
End price/share: $21.65
Starting shares: 187.62
Ending shares: 229.87
Dividends reinvested/share: $7.20
Total return: -50.23%
Average annual return: -13.03%
Starting investment: $10,000.00
Ending investment: $4,977.53

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -13.03%. This would have turned a $10K investment made 5 years ago into $4,977.53 today (as of 03/06/2020). On a total return basis, that’s a result of -50.23% (something to think about: how might BEN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Franklin Resources Inc paid investors a total of $7.20/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 1.08/share, we calculate that BEN has a current yield of approximately 4.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $53.30/share purchase price. This works out to a yield on cost of 9.36%.

Another great investment quote to think about:
“When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.” — Victor Niederhoffer