“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: | 11/30/2015 |
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| End date: | 11/27/2020 | ||||
| Start price/share: | $45.64 | ||||
| End price/share: | $45.83 | ||||
| Starting shares: | 219.11 | ||||
| Ending shares: | 243.20 | ||||
| Dividends reinvested/share: | $5.07 | ||||
| Total return: | 11.46% | ||||
| Average annual return: | 2.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,143.36 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 2.19%. This would have turned a $10K investment made 5 years ago into $11,143.36 today (as of 11/27/2020). On a total return basis, that’s a result of 11.46% (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 $5.07/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 1.3/share, we calculate that HIG has a current yield of approximately 2.84%. 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 $45.64/share purchase price. This works out to a yield on cost of 6.22%.
Another great investment quote to think about:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
