“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 General Mills Inc (NYSE: GIS)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 01/18/2018 |
|
|||
| End date: | 01/17/2023 | ||||
| Start price/share: | $58.66 | ||||
| End price/share: | $81.86 | ||||
| Starting shares: | 170.47 | ||||
| Ending shares: | 203.33 | ||||
| Dividends reinvested/share: | $10.09 | ||||
| Total return: | 66.45% | ||||
| Average annual return: | 10.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,646.64 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 10.73%. This would have turned a $10K investment made 5 years ago into $16,646.64 today (as of 01/17/2023). On a total return basis, that’s a result of 66.45% (something to think about: how might GIS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that General Mills Inc paid investors a total of $10.09/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 2.16/share, we calculate that GIS has a current yield of approximately 2.64%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.16 against the original $58.66/share purchase price. This works out to a yield on cost of 4.50%.
More investment wisdom to ponder:
“It’s not how much money you make, but how much money you keep.” — Robert Kiyosaki
