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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 wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a five year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of The Cigna Group (NYSE: CI) back in 2019. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 06/26/2019


End date: 06/25/2024
Start price/share: $156.91
End price/share: $338.80
Starting shares: 63.73
Ending shares: 67.73
Dividends reinvested/share: $16.24
Total return: 129.48%
Average annual return: 18.06%
Starting investment: $10,000.00
Ending investment: $22,946.23

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 18.06%. This would have turned a $10K investment made 5 years ago into $22,946.23 today (as of 06/25/2024). On a total return basis, that’s a result of 129.48% (something to think about: how might CI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that The Cigna Group paid investors a total of $16.24/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 5.6/share, we calculate that CI has a current yield of approximately 1.65%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.6 against the original $156.91/share purchase price. This works out to a yield on cost of 1.05%.

Here’s one more great investment quote before you go:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch