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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Kroger Co (NYSE: KR) back in 2017: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 12/27/2017


End date: 12/23/2022
Start price/share: $27.71
End price/share: $45.89
Starting shares: 360.88
Ending shares: 400.02
Dividends reinvested/share: $3.53
Total return: 83.57%
Average annual return: 12.94%
Starting investment: $10,000.00
Ending investment: $18,357.12

As we can see, the five year investment result worked out quite well, with an annualized rate of return of 12.94%. This would have turned a $10K investment made 5 years ago into $18,357.12 today (as of 12/23/2022). On a total return basis, that’s a result of 83.57% (something to think about: how might KR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Kroger Co paid investors a total of $3.53/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 1.04/share, we calculate that KR has a current yield of approximately 2.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.04 against the original $27.71/share purchase price. This works out to a yield on cost of 8.19%.

Another great investment quote to think about:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros