“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 Loews Corp. (NYSE: L)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 10/04/2017 |
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| End date: | 10/03/2022 | ||||
| Start price/share: | $48.54 | ||||
| End price/share: | $51.52 | ||||
| Starting shares: | 206.02 | ||||
| Ending shares: | 211.33 | ||||
| Dividends reinvested/share: | $1.26 | ||||
| Total return: | 8.88% | ||||
| Average annual return: | 1.72% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,890.10 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 1.72%. This would have turned a $10K investment made 5 years ago into $10,890.10 today (as of 10/03/2022). On a total return basis, that’s a result of 8.88% (something to think about: how might L shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Loews Corp. paid investors a total of $1.26/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 .25/share, we calculate that L has a current yield of approximately 0.49%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .25 against the original $48.54/share purchase price. This works out to a yield on cost of 1.01%.
Here’s one more great investment quote before you go:
“Generally, the greater the stigma or revulsion, the better the bargain.” — Seth Klarman
