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

Start date: 03/15/2016


End date: 03/12/2021
Start price/share: $36.51
End price/share: $27.71
Starting shares: 273.90
Ending shares: 353.98
Dividends reinvested/share: $8.09
Total return: -1.91%
Average annual return: -0.39%
Starting investment: $10,000.00
Ending investment: $9,806.73

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -0.39%. This would have turned a $10K investment made 5 years ago into $9,806.73 today (as of 03/12/2021). On a total return basis, that’s a result of -1.91% (something to think about: how might PPL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that PPL Corp paid investors a total of $8.09/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 1.66/share, we calculate that PPL has a current yield of approximately 5.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.66 against the original $36.51/share purchase price. This works out to a yield on cost of 16.41%.

One more investment quote to leave you with:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett