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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 above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2018, and take a look at what happened to investors who asked that very question about Berkley Corp (NYSE: WRB), by taking a look at the investment outcome over a five year holding period.

Start date: 05/16/2018
$10,000

05/16/2018
  $19,304

05/15/2023
End date: 05/15/2023
Start price/share: $33.98
End price/share: $59.02
Starting shares: 294.29
Ending shares: 327.03
Dividends reinvested/share: $5.13
Total return: 93.01%
Average annual return: 14.06%
Starting investment: $10,000.00
Ending investment: $19,304.87

The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 14.06%. This would have turned a $10K investment made 5 years ago into $19,304.87 today (as of 05/15/2023). On a total return basis, that’s a result of 93.01% (something to think about: how might WRB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Berkley Corp paid investors a total of $5.13/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 .4/share, we calculate that WRB has a current yield of approximately 0.68%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $33.98/share purchase price. This works out to a yield on cost of 2.00%.

Here’s one more great investment quote before you go:
“He who earns and does not invest will have to work for the rest of his life.” — Debasish Mridha