“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 HanesBrands Inc (NYSE: HBI)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 11/04/2016 |
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| End date: | 11/03/2021 | ||||
| Start price/share: | $23.76 | ||||
| End price/share: | $18.28 | ||||
| Starting shares: | 420.88 | ||||
| Ending shares: | 500.99 | ||||
| Dividends reinvested/share: | $2.96 | ||||
| Total return: | -8.42% | ||||
| Average annual return: | -1.74% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,159.75 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -1.74%. This would have turned a $10K investment made 5 years ago into $9,159.75 today (as of 11/03/2021). On a total return basis, that’s a result of -8.42% (something to think about: how might HBI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that HanesBrands Inc paid investors a total of $2.96/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 .6/share, we calculate that HBI has a current yield of approximately 3.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $23.76/share purchase price. This works out to a yield on cost of 13.80%.
One more investment quote to leave you with:
“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” — Jim Cramer
