“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 KeyCorp (NYSE: KEY)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 01/29/2018 |
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| End date: | 01/26/2023 | ||||
| Start price/share: | $21.80 | ||||
| End price/share: | $18.73 | ||||
| Starting shares: | 458.72 | ||||
| Ending shares: | 558.24 | ||||
| Dividends reinvested/share: | $3.55 | ||||
| Total return: | 4.56% | ||||
| Average annual return: | 0.90% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,457.66 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 0.90%. This would have turned a $10K investment made 5 years ago into $10,457.66 today (as of 01/26/2023). On a total return basis, that’s a result of 4.56% (something to think about: how might KEY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that KeyCorp paid investors a total of $3.55/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 .82/share, we calculate that KEY has a current yield of approximately 4.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .82 against the original $21.80/share purchase price. This works out to a yield on cost of 20.09%.
Another great investment quote to think about:
“The best stock to buy is the one you already own.” — Peter Lynch
