“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 Kroger Co (NYSE: KR)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 02/13/2017 |
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| End date: | 02/10/2022 | ||||
| Start price/share: | $33.21 | ||||
| End price/share: | $45.17 | ||||
| Starting shares: | 301.11 | ||||
| Ending shares: | 333.44 | ||||
| Dividends reinvested/share: | $3.08 | ||||
| Total return: | 50.61% | ||||
| Average annual return: | 8.55% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,064.47 | ||||
The above analysis shows the five year investment result worked out well, with an annualized rate of return of 8.55%. This would have turned a $10K investment made 5 years ago into $15,064.47 today (as of 02/10/2022). On a total return basis, that’s a result of 50.61% (something to think about: how might KR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kroger Co paid investors a total of $3.08/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 .84/share, we calculate that KR has a current yield of approximately 1.86%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $33.21/share purchase price. This works out to a yield on cost of 5.60%.
Another great investment quote to think about:
“When I was young I thought that money was the most important thing in life; now that I am old I know that it is.” — Oscar Wilde
