“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 Invesco Ltd (NYSE: IVZ)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 05/17/2019 |
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| End date: | 05/16/2024 | ||||
| Start price/share: | $20.44 | ||||
| End price/share: | $16.09 | ||||
| Starting shares: | 489.24 | ||||
| Ending shares: | 621.60 | ||||
| Dividends reinvested/share: | $3.99 | ||||
| Total return: | 0.02% | ||||
| Average annual return: | 0.00% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,000.00 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of 0.00%. This would have turned a $10K investment made 5 years ago into $10,000.00 today (as of 05/16/2024). On a total return basis, that’s a result of 0.02% (something to think about: how might IVZ shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Invesco Ltd paid investors a total of $3.99/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 .82/share, we calculate that IVZ has a current yield of approximately 5.09%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .82 against the original $20.44/share purchase price. This works out to a yield on cost of 24.90%.
Another great investment quote to think about:
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” — Warren Buffett
