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

Start date: 04/07/2015


End date: 04/06/2020
Start price/share: $33.79
End price/share: $8.05
Starting shares: 295.95
Ending shares: 338.95
Dividends reinvested/share: $2.69
Total return: -72.71%
Average annual return: -22.87%
Starting investment: $10,000.00
Ending investment: $2,727.77

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -22.87%. This would have turned a $10K investment made 5 years ago into $2,727.77 today (as of 04/06/2020). On a total return basis, that’s a result of -72.71% (something to think about: how might HBI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that HanesBrands Inc paid investors a total of $2.69/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 .6/share, we calculate that HBI has a current yield of approximately 7.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $33.79/share purchase price. This works out to a yield on cost of 22.05%.

Here’s one more great investment quote before you go:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch