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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Loews Corp. (NYSE: L) back in 2016: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 07/06/2016


End date: 07/02/2021
Start price/share: $40.13
End price/share: $54.99
Starting shares: 249.19
Ending shares: 256.03
Dividends reinvested/share: $1.26
Total return: 40.79%
Average annual return: 7.09%
Starting investment: $10,000.00
Ending investment: $14,076.67

As we can see, the five year investment result worked out well, with an annualized rate of return of 7.09%. This would have turned a $10K investment made 5 years ago into $14,076.67 today (as of 07/02/2021). On a total return basis, that’s a result of 40.79% (something to think about: how might L shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Loews Corp. paid investors a total of $1.26/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 .25/share, we calculate that L has a current yield of approximately 0.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .25 against the original $40.13/share purchase price. This works out to a yield on cost of 1.12%.

More investment wisdom to ponder:
“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” — Warren Buffett