“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Hartford Financial Services Group Inc. (NYSE: HIG)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 03/01/2004 |
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| End date: | 02/27/2024 | ||||
| Start price/share: | $65.30 | ||||
| End price/share: | $95.74 | ||||
| Starting shares: | 153.14 | ||||
| Ending shares: | 235.32 | ||||
| Dividends reinvested/share: | $20.96 | ||||
| Total return: | 125.30% | ||||
| Average annual return: | 4.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,513.76 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.14%. This would have turned a $10K investment made 20 years ago into $22,513.76 today (as of 02/27/2024). On a total return basis, that’s a result of 125.30% (something to think about: how might HIG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hartford Financial Services Group Inc. paid investors a total of $20.96/share in dividends over the 20 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 1.88/share, we calculate that HIG has a current yield of approximately 1.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.88 against the original $65.30/share purchase price. This works out to a yield on cost of 3.00%.
One more investment quote to leave you with:
“Go for a business that any idiot can run – because sooner or later, any idiot probably is going to run it.” — Peter Lynch
