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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 wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Chubb Ltd (NYSE: CB) back in 2019. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 01/11/2019


End date: 01/10/2024
Start price/share: $129.52
End price/share: $225.25
Starting shares: 77.21
Ending shares: 85.02
Dividends reinvested/share: $15.95
Total return: 91.51%
Average annual return: 13.88%
Starting investment: $10,000.00
Ending investment: $19,153.02

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 13.88%. This would have turned a $10K investment made 5 years ago into $19,153.02 today (as of 01/10/2024). On a total return basis, that’s a result of 91.51% (something to think about: how might CB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Chubb Ltd paid investors a total of $15.95/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 3.44/share, we calculate that CB has a current yield of approximately 1.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.44 against the original $129.52/share purchase price. This works out to a yield on cost of 1.18%.

More investment wisdom to ponder:
“Price is what you pay. Value is what you get.” — Warren Buffett