“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 Omnicom Group, Inc. (NYSE: OMC)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 05/26/2017 |
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| End date: | 05/25/2022 | ||||
| Start price/share: | $83.26 | ||||
| End price/share: | $72.08 | ||||
| Starting shares: | 120.11 | ||||
| Ending shares: | 143.85 | ||||
| Dividends reinvested/share: | $12.80 | ||||
| Total return: | 3.69% | ||||
| Average annual return: | 0.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,370.37 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 0.73%. This would have turned a $10K investment made 5 years ago into $10,370.37 today (as of 05/25/2022). On a total return basis, that’s a result of 3.69% (something to think about: how might OMC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Omnicom Group, Inc. paid investors a total of $12.80/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 2.8/share, we calculate that OMC has a current yield of approximately 3.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.8 against the original $83.26/share purchase price. This works out to a yield on cost of 4.66%.
Here’s one more great investment quote before you go:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch
