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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 Capital One Financial Corp (NYSE: COF)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 01/31/2018


End date: 01/30/2023
Start price/share: $103.96
End price/share: $115.00
Starting shares: 96.19
Ending shares: 104.74
Dividends reinvested/share: $9.20
Total return: 20.45%
Average annual return: 3.79%
Starting investment: $10,000.00
Ending investment: $12,044.19

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 3.79%. This would have turned a $10K investment made 5 years ago into $12,044.19 today (as of 01/30/2023). On a total return basis, that’s a result of 20.45% (something to think about: how might COF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Capital One Financial Corp paid investors a total of $9.20/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 2.4/share, we calculate that COF has a current yield of approximately 2.09%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $103.96/share purchase price. This works out to a yield on cost of 2.01%.

Here’s one more great investment quote before you go:
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” — Warren Buffett