“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 longterm 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 General Electric Co (NYSE: GE)? Today, we examine the outcome of a five year investment into the stock back in 2015.
Start date:  08/07/2015 


End date:  08/06/2020  
Start price/share:  $24.80  
End price/share:  $6.33  
Starting shares:  403.23  
Ending shares:  452.21  
Dividends reinvested/share:  $2.56  
Total return:  71.38%  
Average annual return:  22.12%  
Starting investment:  $10,000.00  
Ending investment:  $2,863.07 
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of 22.12%. This would have turned a $10K investment made 5 years ago into $2,863.07 today (as of 08/06/2020). On a total return basis, that’s a result of 71.38% (something to think about: how might GE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that General Electric Co paid investors a total of $2.56/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 exdate is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of .04/share, we calculate that GE has a current yield of approximately 0.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .04 against the original $24.80/share purchase price. This works out to a yield on cost of 2.54%.
More investment wisdom to ponder:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch