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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 US Bancorp (NYSE: USB)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 12/24/2018


End date: 12/21/2023
Start price/share: $43.76
End price/share: $43.31
Starting shares: 228.52
Ending shares: 277.93
Dividends reinvested/share: $8.71
Total return: 20.37%
Average annual return: 3.78%
Starting investment: $10,000.00
Ending investment: $12,035.94

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 3.78%. This would have turned a $10K investment made 5 years ago into $12,035.94 today (as of 12/21/2023). On a total return basis, that’s a result of 20.37% (something to think about: how might USB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that US Bancorp paid investors a total of $8.71/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 1.96/share, we calculate that USB has a current yield of approximately 4.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.96 against the original $43.76/share purchase price. This works out to a yield on cost of 10.35%.

One more piece of investment wisdom to leave you with:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso