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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering American International Group Inc (NYSE: AIG) back in 2019, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 02/28/2019


End date: 02/27/2024
Start price/share: $43.20
End price/share: $71.95
Starting shares: 231.48
Ending shares: 265.18
Dividends reinvested/share: $6.52
Total return: 90.80%
Average annual return: 13.79%
Starting investment: $10,000.00
Ending investment: $19,077.46

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 13.79%. This would have turned a $10K investment made 5 years ago into $19,077.46 today (as of 02/27/2024). On a total return basis, that’s a result of 90.80% (something to think about: how might AIG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that American International Group Inc paid investors a total of $6.52/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 1.44/share, we calculate that AIG has a current yield of approximately 2.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.44 against the original $43.20/share purchase price. This works out to a yield on cost of 4.63%.

More investment wisdom to ponder:
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer