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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 Cognizant Technology Solutions Corp. (NASD: CTSH)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 09/27/2016


End date: 09/24/2021
Start price/share: $54.40
End price/share: $77.62
Starting shares: 183.82
Ending shares: 193.82
Dividends reinvested/share: $3.65
Total return: 50.44%
Average annual return: 8.52%
Starting investment: $10,000.00
Ending investment: $15,043.69

The above analysis shows the five year investment result worked out well, with an annualized rate of return of 8.52%. This would have turned a $10K investment made 5 years ago into $15,043.69 today (as of 09/24/2021). On a total return basis, that’s a result of 50.44% (something to think about: how might CTSH shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Cognizant Technology Solutions Corp. paid investors a total of $3.65/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 .96/share, we calculate that CTSH has a current yield of approximately 1.24%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .96 against the original $54.40/share purchase price. This works out to a yield on cost of 2.28%.

One more piece of investment wisdom to leave you with:
“If you can follow only one bit of data, follow the earnings.” — Peter Lynch