“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 Invesco Ltd (NYSE: IVZ)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 04/16/2015 |
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| End date: | 04/15/2020 | ||||
| Start price/share: | $40.50 | ||||
| End price/share: | $8.96 | ||||
| Starting shares: | 246.91 | ||||
| Ending shares: | 309.39 | ||||
| Dividends reinvested/share: | $5.80 | ||||
| Total return: | -72.28% | ||||
| Average annual return: | -22.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,772.29 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -22.62%. This would have turned a $10K investment made 5 years ago into $2,772.29 today (as of 04/15/2020). On a total return basis, that’s a result of -72.28% (something to think about: how might IVZ shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Invesco Ltd paid investors a total of $5.80/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 1.24/share, we calculate that IVZ has a current yield of approximately 13.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.24 against the original $40.50/share purchase price. This works out to a yield on cost of 34.17%.
One more piece of investment wisdom to leave you with:
“As in roulette, same is true of the stock trader, who will find that the expense of trading weights the dice heavily against him.” — Benjamin Graham
