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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 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 Ecolab Inc (NYSE: ECL)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 09/07/2018


End date: 09/06/2023
Start price/share: $153.35
End price/share: $181.62
Starting shares: 65.21
Ending shares: 68.82
Dividends reinvested/share: $9.68
Total return: 24.99%
Average annual return: 4.56%
Starting investment: $10,000.00
Ending investment: $12,497.64

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 4.56%. This would have turned a $10K investment made 5 years ago into $12,497.64 today (as of 09/06/2023). On a total return basis, that’s a result of 24.99% (something to think about: how might ECL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Ecolab Inc paid investors a total of $9.68/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 2.12/share, we calculate that ECL has a current yield of approximately 1.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.12 against the original $153.35/share purchase price. This works out to a yield on cost of 0.76%.

More investment wisdom to ponder:
“Investing is the intersection of economics and psychology.” — Seth Klarman