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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 Union Pacific Corp (NYSE: UNP)? Today, we examine the outcome of a five year investment into the stock back in 2017.

Start date: 04/28/2017


End date: 04/27/2022
Start price/share: $111.96
End price/share: $236.79
Starting shares: 89.32
Ending shares: 99.18
Dividends reinvested/share: $17.99
Total return: 134.86%
Average annual return: 18.62%
Starting investment: $10,000.00
Ending investment: $23,484.95

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 18.62%. This would have turned a $10K investment made 5 years ago into $23,484.95 today (as of 04/27/2022). On a total return basis, that’s a result of 134.86% (something to think about: how might UNP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Union Pacific Corp paid investors a total of $17.99/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 4.72/share, we calculate that UNP has a current yield of approximately 1.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.72 against the original $111.96/share purchase price. This works out to a yield on cost of 1.78%.

One more piece of investment wisdom to leave you with:
“Most investors want to do today what they should have done yesterday.” — Larry Summers