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

Start date: 04/14/2016


End date: 04/13/2021
Start price/share: $35.44
End price/share: $34.64
Starting shares: 282.17
Ending shares: 339.94
Dividends reinvested/share: $6.72
Total return: 17.76%
Average annual return: 3.32%
Starting investment: $10,000.00
Ending investment: $11,773.94

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.32%. This would have turned a $10K investment made 5 years ago into $11,773.94 today (as of 04/13/2021). On a total return basis, that’s a result of 17.76% (something to think about: how might HFC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that HollyFrontier Corp paid investors a total of $6.72/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 1.4/share, we calculate that HFC has a current yield of approximately 4.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $35.44/share purchase price. This works out to a yield on cost of 11.40%.

One more piece of investment wisdom to leave you with:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham