“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 General Dynamics Corp (NYSE: GD)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 07/18/2019 |
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| End date: | 07/17/2024 | ||||
| Start price/share: | $183.18 | ||||
| End price/share: | $291.99 | ||||
| Starting shares: | 54.59 | ||||
| Ending shares: | 61.60 | ||||
| Dividends reinvested/share: | $24.36 | ||||
| Total return: | 79.85% | ||||
| Average annual return: | 12.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,986.10 | ||||
As we can see, the five year investment result worked out quite well, with an annualized rate of return of 12.45%. This would have turned a $10K investment made 5 years ago into $17,986.10 today (as of 07/17/2024). On a total return basis, that’s a result of 79.85% (something to think about: how might GD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that General Dynamics Corp paid investors a total of $24.36/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 5.68/share, we calculate that GD has a current yield of approximately 1.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.68 against the original $183.18/share purchase price. This works out to a yield on cost of 1.06%.
Here’s one more great investment quote before you go:
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” — George Soros
