“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade 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 two-decade investment into the stock back in 2004.
| Start date: | 05/21/2004 |
|
|||
| End date: | 05/20/2024 | ||||
| Start price/share: | $64.95 | ||||
| End price/share: | $102.08 | ||||
| Starting shares: | 153.96 | ||||
| Ending shares: | 237.77 | ||||
| Dividends reinvested/share: | $21.43 | ||||
| Total return: | 142.71% | ||||
| Average annual return: | 4.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,267.77 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 4.53%. This would have turned a $10K investment made 20 years ago into $24,267.77 today (as of 05/20/2024). On a total return basis, that’s a result of 142.71% (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 $21.43/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 1.84%. 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 $64.95/share purchase price. This works out to a yield on cost of 2.83%.
One more piece of investment wisdom to leave you with:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett
