“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 Hartford Financial Services Group Inc. (NYSE: HIG)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 07/13/2015 |
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| End date: | 07/10/2020 | ||||
| Start price/share: | $45.10 | ||||
| End price/share: | $37.41 | ||||
| Starting shares: | 221.73 | ||||
| Ending shares: | 246.39 | ||||
| Dividends reinvested/share: | $5.17 | ||||
| Total return: | -7.83% | ||||
| Average annual return: | -1.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,216.23 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -1.62%. This would have turned a $10K investment made 5 years ago into $9,216.23 today (as of 07/10/2020). On a total return basis, that’s a result of -7.83% (something to think about: how might HIG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hartford Financial Services Group Inc. paid investors a total of $5.17/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 1.3/share, we calculate that HIG has a current yield of approximately 3.48%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.3 against the original $45.10/share purchase price. This works out to a yield on cost of 7.72%.
One more investment quote to leave you with:
“Ensure management’s interests are aligned with shareholders.” — Sam Zell
