“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 Juniper Networks Inc (NYSE: JNPR)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 02/16/2016 |
|
|||
| End date: | 02/12/2021 | ||||
| Start price/share: | $23.21 | ||||
| End price/share: | $25.25 | ||||
| Starting shares: | 430.85 | ||||
| Ending shares: | 486.85 | ||||
| Dividends reinvested/share: | $3.08 | ||||
| Total return: | 22.93% | ||||
| Average annual return: | 4.22% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,292.97 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 4.22%. This would have turned a $10K investment made 5 years ago into $12,292.97 today (as of 02/12/2021). On a total return basis, that’s a result of 22.93% (something to think about: how might JNPR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Juniper Networks Inc paid investors a total of $3.08/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 .8/share, we calculate that JNPR has a current yield of approximately 3.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $23.21/share purchase price. This works out to a yield on cost of 13.66%.
Another great investment quote to think about:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
