“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 Target Corp (NYSE: TGT)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 10/12/2017 |
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| End date: | 10/11/2022 | ||||
| Start price/share: | $60.19 | ||||
| End price/share: | $154.50 | ||||
| Starting shares: | 166.14 | ||||
| Ending shares: | 188.01 | ||||
| Dividends reinvested/share: | $14.46 | ||||
| Total return: | 190.48% | ||||
| Average annual return: | 23.77% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,045.37 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 23.77%. This would have turned a $10K investment made 5 years ago into $29,045.37 today (as of 10/11/2022). On a total return basis, that’s a result of 190.48% (something to think about: how might TGT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Target Corp paid investors a total of $14.46/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 4.32/share, we calculate that TGT has a current yield of approximately 2.80%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.32 against the original $60.19/share purchase price. This works out to a yield on cost of 4.65%.
More investment wisdom to ponder:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
