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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Humana Inc. (NYSE: HUM) back in 2018: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 12/04/2018


End date: 12/01/2023
Start price/share: $324.47
End price/share: $495.21
Starting shares: 30.82
Ending shares: 31.92
Dividends reinvested/share: $13.81
Total return: 58.06%
Average annual return: 9.60%
Starting investment: $10,000.00
Ending investment: $15,806.46

As shown above, the five year investment result worked out well, with an annualized rate of return of 9.60%. This would have turned a $10K investment made 5 years ago into $15,806.46 today (as of 12/01/2023). On a total return basis, that’s a result of 58.06% (something to think about: how might HUM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Humana Inc. paid investors a total of $13.81/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 3.54/share, we calculate that HUM has a current yield of approximately 0.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.54 against the original $324.47/share purchase price. This works out to a yield on cost of 0.22%.

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