“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 Apple Inc (NASD: AAPL)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 09/21/2016 |
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| End date: | 09/20/2021 | ||||
| Start price/share: | $28.39 | ||||
| End price/share: | $142.94 | ||||
| Starting shares: | 352.24 | ||||
| Ending shares: | 375.65 | ||||
| Dividends reinvested/share: | $3.68 | ||||
| Total return: | 436.95% | ||||
| Average annual return: | 39.95% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $53,686.43 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 39.95%. This would have turned a $10K investment made 5 years ago into $53,686.43 today (as of 09/20/2021). On a total return basis, that’s a result of 436.95% (something to think about: how might AAPL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Apple Inc paid investors a total of $3.68/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 .88/share, we calculate that AAPL has a current yield of approximately 0.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .88 against the original $28.39/share purchase price. This works out to a yield on cost of 2.18%.
More investment wisdom to ponder:
“Successful investing is anticipating the anticipations of others.” — John Maynard Keynes
