“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 Franklin Resources Inc (NYSE: BEN)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 05/17/2018 |
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| End date: | 05/16/2023 | ||||
| Start price/share: | $34.04 | ||||
| End price/share: | $24.02 | ||||
| Starting shares: | 293.77 | ||||
| Ending shares: | 360.58 | ||||
| Dividends reinvested/share: | $5.46 | ||||
| Total return: | -13.39% | ||||
| Average annual return: | -2.83% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,662.85 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -2.83%. This would have turned a $10K investment made 5 years ago into $8,662.85 today (as of 05/16/2023). On a total return basis, that’s a result of -13.39% (something to think about: how might BEN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Franklin Resources Inc paid investors a total of $5.46/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 1.2/share, we calculate that BEN has a current yield of approximately 5.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $34.04/share purchase price. This works out to a yield on cost of 14.69%.
One more piece of investment wisdom to leave you with:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes
