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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 American Airlines Group Inc (NASD: AAL)? Today, we examine the outcome of a five year investment into the stock back in 2019.

Start date: 01/02/2019


End date: 12/29/2023
Start price/share: $32.48
End price/share: $13.74
Starting shares: 307.88
Ending shares: 312.81
Dividends reinvested/share: $0.50
Total return: -57.02%
Average annual return: -15.56%
Starting investment: $10,000.00
Ending investment: $4,298.78

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -15.56%. This would have turned a $10K investment made 5 years ago into $4,298.78 today (as of 12/29/2023). On a total return basis, that’s a result of -57.02% (something to think about: how might AAL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that American Airlines Group Inc paid investors a total of $0.50/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/share, we calculate that AAL has a current yield of approximately 2.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $32.48/share purchase price. This works out to a yield on cost of 8.96%.

One more piece of investment wisdom to leave you with:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman