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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 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


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