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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Seagate Technology Holdings PLC (NASD: STX) back in 2019: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 06/05/2019


End date: 06/04/2024
Start price/share: $44.05
End price/share: $91.85
Starting shares: 227.01
Ending shares: 280.75
Dividends reinvested/share: $13.54
Total return: 157.87%
Average annual return: 20.85%
Starting investment: $10,000.00
Ending investment: $25,790.43

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 20.85%. This would have turned a $10K investment made 5 years ago into $25,790.43 today (as of 06/04/2024). On a total return basis, that’s a result of 157.87% (something to think about: how might STX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Seagate Technology Holdings PLC paid investors a total of $13.54/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 2.8/share, we calculate that STX has a current yield of approximately 3.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.8 against the original $44.05/share purchase price. This works out to a yield on cost of 6.92%.

More investment wisdom to ponder:
“In the long run, we are all dead.” — John Maynard Keynes