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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 above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2017, and take a look at what happened to investors who asked that very question about Starbucks Corp. (NASD: SBUX), by taking a look at the investment outcome over a five year holding period.

Start date: 03/06/2017


End date: 03/03/2022
Start price/share: $56.68
End price/share: $91.53
Starting shares: 176.43
Ending shares: 194.48
Dividends reinvested/share: $7.62
Total return: 78.01%
Average annual return: 12.24%
Starting investment: $10,000.00
Ending investment: $17,801.78

As we can see, the five year investment result worked out quite well, with an annualized rate of return of 12.24%. This would have turned a $10K investment made 5 years ago into $17,801.78 today (as of 03/03/2022). On a total return basis, that’s a result of 78.01% (something to think about: how might SBUX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Starbucks Corp. paid investors a total of $7.62/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 1.96/share, we calculate that SBUX has a current yield of approximately 2.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.96 against the original $56.68/share purchase price. This works out to a yield on cost of 3.78%.

Here’s one more great investment quote before you go:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell