“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 Micron Technology Inc. (NASD: MU)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 06/01/2018 |
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| End date: | 05/31/2023 | ||||
| Start price/share: | $58.74 | ||||
| End price/share: | $68.20 | ||||
| Starting shares: | 170.24 | ||||
| Ending shares: | 172.34 | ||||
| Dividends reinvested/share: | $0.76 | ||||
| Total return: | 17.53% | ||||
| Average annual return: | 3.28% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,751.17 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 3.28%. This would have turned a $10K investment made 5 years ago into $11,751.17 today (as of 05/31/2023). On a total return basis, that’s a result of 17.53% (something to think about: how might MU shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Micron Technology Inc. paid investors a total of $0.76/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 .46/share, we calculate that MU has a current yield of approximately 0.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .46 against the original $58.74/share purchase price. This works out to a yield on cost of 1.14%.
Here’s one more great investment quote before you go:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham
