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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 Starbucks Corp. (NASD: SBUX)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 01/05/2016


End date: 01/04/2021
Start price/share: $58.65
End price/share: $103.10
Starting shares: 170.50
Ending shares: 187.53
Dividends reinvested/share: $6.39
Total return: 93.34%
Average annual return: 14.09%
Starting investment: $10,000.00
Ending investment: $19,337.25

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 14.09%. This would have turned a $10K investment made 5 years ago into $19,337.25 today (as of 01/04/2021). On a total return basis, that’s a result of 93.34% (something to think about: how might SBUX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Starbucks Corp. paid investors a total of $6.39/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 1.8/share, we calculate that SBUX has a current yield of approximately 1.75%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.8 against the original $58.65/share purchase price. This works out to a yield on cost of 2.98%.

One more investment quote to leave you with:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton