“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 Avery Dennison Corp (NYSE: AVY)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 07/12/2016 |
|
|||
| End date: | 07/09/2021 | ||||
| Start price/share: | $72.96 | ||||
| End price/share: | $210.35 | ||||
| Starting shares: | 137.06 | ||||
| Ending shares: | 150.64 | ||||
| Dividends reinvested/share: | $10.51 | ||||
| Total return: | 216.87% | ||||
| Average annual return: | 25.98% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $31,692.64 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 25.98%. This would have turned a $10K investment made 5 years ago into $31,692.64 today (as of 07/09/2021). On a total return basis, that’s a result of 216.87% (something to think about: how might AVY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Avery Dennison Corp paid investors a total of $10.51/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 2.72/share, we calculate that AVY has a current yield of approximately 1.29%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.72 against the original $72.96/share purchase price. This works out to a yield on cost of 1.77%.
One more investment quote to leave you with:
“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” — Benjamin Graham
