“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 Pentair PLC (NYSE: PNR)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 05/24/2017 |
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| End date: | 05/23/2022 | ||||
| Start price/share: | $44.72 | ||||
| End price/share: | $49.11 | ||||
| Starting shares: | 223.61 | ||||
| Ending shares: | 243.38 | ||||
| Dividends reinvested/share: | $3.98 | ||||
| Total return: | 19.52% | ||||
| Average annual return: | 3.63% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,951.64 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 3.63%. This would have turned a $10K investment made 5 years ago into $11,951.64 today (as of 05/23/2022). On a total return basis, that’s a result of 19.52% (something to think about: how might PNR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pentair PLC paid investors a total of $3.98/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 PNR has a current yield of approximately 1.71%. 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 $44.72/share purchase price. This works out to a yield on cost of 3.82%.
One more piece of investment wisdom to leave you with:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John
