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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

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2019, and take a look at what happened to investors who asked that very question about Kellanova (NYSE: K), by taking a look at the investment outcome over a five year holding period.

Start date: 06/10/2019


End date: 06/07/2024
Start price/share: $51.43
End price/share: $59.63
Starting shares: 194.44
Ending shares: 232.93
Dividends reinvested/share: $10.93
Total return: 38.90%
Average annual return: 6.80%
Starting investment: $10,000.00
Ending investment: $13,892.42

As shown above, the five year investment result worked out well, with an annualized rate of return of 6.80%. This would have turned a $10K investment made 5 years ago into $13,892.42 today (as of 06/07/2024). On a total return basis, that’s a result of 38.90% (something to think about: how might K shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Kellanova paid investors a total of $10.93/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 2.24/share, we calculate that K has a current yield of approximately 3.76%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.24 against the original $51.43/share purchase price. This works out to a yield on cost of 7.31%.

One more investment quote to leave you with:
“When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.” — Victor Niederhoffer