“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 Hormel Foods Corp. (NYSE: HRL)? Today, we examine the outcome of a five year investment into the stock back in 2018.
|Average annual return:||3.94%|
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.94%. This would have turned a $10K investment made 5 years ago into $12,128.91 today (as of 06/23/2023). On a total return basis, that’s a result of 21.32% (something to think about: how might HRL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hormel Foods Corp. paid investors a total of $4.72/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 1.1/share, we calculate that HRL has a current yield of approximately 2.72%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.1 against the original $37.06/share purchase price. This works out to a yield on cost of 7.34%.
Another great investment quote to think about:
“As long as you enjoy investing, you’ll be willing to do the homework and stay in the game.” — Jim Cramer