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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 Honeywell International Inc (NASD: HON)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 12/12/2018


End date: 12/11/2023
Start price/share: $138.29
End price/share: $200.39
Starting shares: 72.31
Ending shares: 80.12
Dividends reinvested/share: $18.90
Total return: 60.55%
Average annual return: 9.93%
Starting investment: $10,000.00
Ending investment: $16,053.92

As we can see, the five year investment result worked out well, with an annualized rate of return of 9.93%. This would have turned a $10K investment made 5 years ago into $16,053.92 today (as of 12/11/2023). On a total return basis, that’s a result of 60.55% (something to think about: how might HON shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Honeywell International Inc paid investors a total of $18.90/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 4.32/share, we calculate that HON has a current yield of approximately 2.16%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.32 against the original $138.29/share purchase price. This works out to a yield on cost of 1.56%.

Here’s one more great investment quote before you go:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett