“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Hartford Financial Services Group Inc. (NYSE: HIG)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 05/01/2000 |
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| End date: | 04/29/2020 | ||||
| Start price/share: | $54.69 | ||||
| End price/share: | $41.15 | ||||
| Starting shares: | 182.86 | ||||
| Ending shares: | 275.44 | ||||
| Dividends reinvested/share: | $19.39 | ||||
| Total return: | 13.34% | ||||
| Average annual return: | 0.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,338.92 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 0.63%. This would have turned a $10K investment made 20 years ago into $11,338.92 today (as of 04/29/2020). On a total return basis, that’s a result of 13.34% (something to think about: how might HIG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hartford Financial Services Group Inc. paid investors a total of $19.39/share in dividends over the 20 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 1.3/share, we calculate that HIG has a current yield of approximately 3.16%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.3 against the original $54.69/share purchase price. This works out to a yield on cost of 5.78%.
Here’s one more great investment quote before you go:
“If you can follow only one bit of data, follow the earnings.” — Peter Lynch
