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“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 Ralph Lauren Corp (NYSE: RL)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 09/25/2015


End date: 09/24/2020
Start price/share: $108.32
End price/share: $71.66
Starting shares: 92.32
Ending shares: 102.29
Dividends reinvested/share: $10.25
Total return: -26.70%
Average annual return: -6.02%
Starting investment: $10,000.00
Ending investment: $7,329.99

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -6.02%. This would have turned a $10K investment made 5 years ago into $7,329.99 today (as of 09/24/2020). On a total return basis, that’s a result of -26.70% (something to think about: how might RL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ralph Lauren Corp paid investors a total of $10.25/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 2.75/share, we calculate that RL has a current yield of approximately 3.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.75 against the original $108.32/share purchase price. This works out to a yield on cost of 3.55%.

More investment wisdom to ponder:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra