Photo credit:

“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 Hormel Foods Corp. (NYSE: HRL)? Today, we examine the outcome of a five year investment into the stock back in 2019.

Start date: 03/22/2019


End date: 03/21/2024
Start price/share: $43.59
End price/share: $34.26
Starting shares: 229.41
Ending shares: 257.38
Dividends reinvested/share: $4.97
Total return: -11.82%
Average annual return: -2.48%
Starting investment: $10,000.00
Ending investment: $8,819.39

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -2.48%. This would have turned a $10K investment made 5 years ago into $8,819.39 today (as of 03/21/2024). On a total return basis, that’s a result of -11.82% (something to think about: how might HRL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Hormel Foods Corp. paid investors a total of $4.97/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 1.13/share, we calculate that HRL has a current yield of approximately 3.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.13 against the original $43.59/share purchase price. This works out to a yield on cost of 7.57%.

More investment wisdom to ponder:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher