“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 NetApp, Inc. (NASD: NTAP)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 09/21/2017 |
|
|||
| End date: | 09/20/2022 | ||||
| Start price/share: | $41.86 | ||||
| End price/share: | $66.30 | ||||
| Starting shares: | 238.89 | ||||
| Ending shares: | 273.83 | ||||
| Dividends reinvested/share: | $8.54 | ||||
| Total return: | 81.55% | ||||
| Average annual return: | 12.67% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,156.89 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 12.67%. This would have turned a $10K investment made 5 years ago into $18,156.89 today (as of 09/20/2022). On a total return basis, that’s a result of 81.55% (something to think about: how might NTAP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that NetApp, Inc. paid investors a total of $8.54/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/share, we calculate that NTAP has a current yield of approximately 3.02%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $41.86/share purchase price. This works out to a yield on cost of 7.21%.
One more investment quote to leave you with:
“Most investors want to do today what they should have done yesterday.” — Larry Summers
