“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 Kimberly-Clark Corp. (NYSE: KMB)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 03/31/2017 |
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| End date: | 03/30/2022 | ||||
| Start price/share: | $131.63 | ||||
| End price/share: | $123.85 | ||||
| Starting shares: | 75.97 | ||||
| Ending shares: | 89.52 | ||||
| Dividends reinvested/share: | $21.03 | ||||
| Total return: | 10.87% | ||||
| Average annual return: | 2.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,084.17 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 2.08%. This would have turned a $10K investment made 5 years ago into $11,084.17 today (as of 03/30/2022). On a total return basis, that’s a result of 10.87% (something to think about: how might KMB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kimberly-Clark Corp. paid investors a total of $21.03/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 4.64/share, we calculate that KMB has a current yield of approximately 3.75%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.64 against the original $131.63/share purchase price. This works out to a yield on cost of 2.85%.
More investment wisdom to ponder:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
