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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 Alaska Air Group, Inc. (NYSE: ALK)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 05/08/2015


End date: 05/07/2020
Start price/share: $66.27
End price/share: $28.25
Starting shares: 150.90
Ending shares: 164.48
Dividends reinvested/share: $5.95
Total return: -53.54%
Average annual return: -14.21%
Starting investment: $10,000.00
Ending investment: $4,645.16

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -14.21%. This would have turned a $10K investment made 5 years ago into $4,645.16 today (as of 05/07/2020). On a total return basis, that’s a result of -53.54% (something to think about: how might ALK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Alaska Air Group, Inc. paid investors a total of $5.95/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 1.5/share, we calculate that ALK has a current yield of approximately 5.31%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.5 against the original $66.27/share purchase price. This works out to a yield on cost of 8.01%.

One more piece of investment wisdom to leave you with:
“The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.” — Bruce Kovner