Photo credit:

“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 Goldman Sachs Group Inc (the (NYSE: GS)? 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: $209.06
End price/share: $196.06
Starting shares: 47.83
Ending shares: 51.72
Dividends reinvested/share: $16.00
Total return: 1.40%
Average annual return: 0.28%
Starting investment: $10,000.00
Ending investment: $10,140.86

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 0.28%. This would have turned a $10K investment made 5 years ago into $10,140.86 today (as of 05/26/2020). On a total return basis, that’s a result of 1.40% (something to think about: how might GS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Goldman Sachs Group Inc (the paid investors a total of $16.00/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 5/share, we calculate that GS has a current yield of approximately 2.55%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $209.06/share purchase price. This works out to a yield on cost of 1.22%.

Another great investment quote to think about:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt