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 Genuine Parts Co. (NYSE: GPC)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 07/15/2015


End date: 07/14/2020
Start price/share: $90.49
End price/share: $86.17
Starting shares: 110.51
Ending shares: 128.24
Dividends reinvested/share: $14.07
Total return: 10.50%
Average annual return: 2.02%
Starting investment: $10,000.00
Ending investment: $11,052.24

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 2.02%. This would have turned a $10K investment made 5 years ago into $11,052.24 today (as of 07/14/2020). On a total return basis, that’s a result of 10.50% (something to think about: how might GPC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Genuine Parts Co. paid investors a total of $14.07/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 3.16/share, we calculate that GPC has a current yield of approximately 3.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.16 against the original $90.49/share purchase price. This works out to a yield on cost of 4.06%.

More investment wisdom to ponder:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru