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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 Capital One Financial Corp (NYSE: COF), by taking a look at the investment outcome over a five year holding period.

Start date: 08/11/2017


End date: 08/10/2022
Start price/share: $82.80
End price/share: $112.74
Starting shares: 120.77
Ending shares: 131.42
Dividends reinvested/share: $9.00
Total return: 48.16%
Average annual return: 8.18%
Starting investment: $10,000.00
Ending investment: $14,816.13

As shown above, the five year investment result worked out well, with an annualized rate of return of 8.18%. This would have turned a $10K investment made 5 years ago into $14,816.13 today (as of 08/10/2022). On a total return basis, that’s a result of 48.16% (something to think about: how might COF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Capital One Financial Corp paid investors a total of $9.00/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 2.4/share, we calculate that COF has a current yield of approximately 2.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $82.80/share purchase price. This works out to a yield on cost of 2.57%.

One more piece of investment wisdom to leave you with:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain