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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 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 US Bancorp (NYSE: USB)? 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: $53.74
End price/share: $44.99
Starting shares: 186.08
Ending shares: 218.48
Dividends reinvested/share: $7.88
Total return: -1.70%
Average annual return: -0.34%
Starting investment: $10,000.00
Ending investment: $9,831.15

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -0.34%. This would have turned a $10K investment made 5 years ago into $9,831.15 today (as of 09/20/2022). On a total return basis, that’s a result of -1.70% (something to think about: how might USB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that US Bancorp paid investors a total of $7.88/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 1.92/share, we calculate that USB has a current yield of approximately 4.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $53.74/share purchase price. This works out to a yield on cost of 7.95%.

More investment wisdom to ponder:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham