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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 Seagate Technology plc (NASD: STX)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 05/27/2015


End date: 05/26/2020
Start price/share: $55.34
End price/share: $51.20
Starting shares: 180.70
Ending shares: 241.81
Dividends reinvested/share: $11.92
Total return: 23.80%
Average annual return: 4.36%
Starting investment: $10,000.00
Ending investment: $12,380.01

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 4.36%. This would have turned a $10K investment made 5 years ago into $12,380.01 today (as of 05/26/2020). On a total return basis, that’s a result of 23.80% (something to think about: how might STX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Seagate Technology plc paid investors a total of $11.92/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 2.6/share, we calculate that STX has a current yield of approximately 5.08%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.6 against the original $55.34/share purchase price. This works out to a yield on cost of 9.18%.

One more investment quote to leave you with:
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle