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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2016, investors considering an investment into shares of Rockwell Automation, Inc. (NYSE: ROK) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 08/25/2016


End date: 08/24/2021
Start price/share: $117.69
End price/share: $316.45
Starting shares: 84.97
Ending shares: 93.84
Dividends reinvested/share: $18.79
Total return: 196.97%
Average annual return: 24.32%
Starting investment: $10,000.00
Ending investment: $29,696.48

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 24.32%. This would have turned a $10K investment made 5 years ago into $29,696.48 today (as of 08/24/2021). On a total return basis, that’s a result of 196.97% (something to think about: how might ROK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Rockwell Automation, Inc. paid investors a total of $18.79/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 4.28/share, we calculate that ROK has a current yield of approximately 1.35%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.28 against the original $117.69/share purchase price. This works out to a yield on cost of 1.15%.

One more investment quote to leave you with:
“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger