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

Start date: 03/13/2015
$10,000

03/13/2015
$7,329

03/12/2020
End date: 03/12/2020
Start price/share: $45.77
End price/share: $28.30
Starting shares: 218.48
Ending shares: 259.02
Dividends reinvested/share: $7.72
Total return: -26.70%
Average annual return: -6.02%
Starting investment: $10,000.00
Ending investment: $7,329.99

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -6.02%. This would have turned a $10K investment made 5 years ago into $7,329.99 today (as of 03/12/2020). On a total return basis, that’s a result of -26.70% (something to think about: how might MET shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that MetLife Inc paid investors a total of $7.72/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 1.76/share, we calculate that MET has a current yield of approximately 5.85%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.76 against the original $45.77/share purchase price. This works out to a yield on cost of 12.78%.

Another great investment quote to think about:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham