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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 Procter & Gamble Company (NYSE: PG), by taking a look at the investment outcome over a five year holding period.

Start date: 07/24/2017


End date: 07/21/2022
Start price/share: $88.18
End price/share: $140.77
Starting shares: 113.40
Ending shares: 130.07
Dividends reinvested/share: $15.70
Total return: 83.10%
Average annual return: 12.87%
Starting investment: $10,000.00
Ending investment: $18,306.47

The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 12.87%. This would have turned a $10K investment made 5 years ago into $18,306.47 today (as of 07/21/2022). On a total return basis, that’s a result of 83.10% (something to think about: how might PG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Procter & Gamble Company paid investors a total of $15.70/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 3.6532/share, we calculate that PG has a current yield of approximately 2.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6532 against the original $88.18/share purchase price. This works out to a yield on cost of 2.95%.

More investment wisdom to ponder:
“A stock is not just a ticker symbol or an electronic blip; it is an ownership interest in an actual business, with an underlying value that does not depend on its share price.” — Benjamin Graham