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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 Cincinnati Financial Corp. (NASD: CINF), by taking a look at the investment outcome over a five year holding period.

Start date: 06/06/2017


End date: 06/03/2022
Start price/share: $69.48
End price/share: $126.34
Starting shares: 143.93
Ending shares: 164.94
Dividends reinvested/share: $11.97
Total return: 108.38%
Average annual return: 15.84%
Starting investment: $10,000.00
Ending investment: $20,842.17

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 15.84%. This would have turned a $10K investment made 5 years ago into $20,842.17 today (as of 06/03/2022). On a total return basis, that’s a result of 108.38% (something to think about: how might CINF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Cincinnati Financial Corp. paid investors a total of $11.97/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 2.76/share, we calculate that CINF has a current yield of approximately 2.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.76 against the original $69.48/share purchase price. This works out to a yield on cost of 3.14%.

One more investment quote to leave you with:
“Price is what you pay. Value is what you get.” — Warren Buffett