“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 Xerox Holdings Corp (NYSE: XRX)? Today, we examine the outcome of a five year investment into the stock back in 2015.
|Average annual return:||-8.48%|
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -8.48%. This would have turned a $10K investment made 5 years ago into $6,419.11 today (as of 07/01/2020). On a total return basis, that’s a result of -35.80% (something to think about: how might XRX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Xerox Holdings Corp paid investors a total of $4.44/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/share, we calculate that XRX has a current yield of approximately 6.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $27.84/share purchase price. This works out to a yield on cost of 23.71%.
One more investment quote to leave you with:
“A risk-reward ratio is important, but so is an aggravation-satisfaction ratio.” — Muriel Siebert