“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 PPG Industries Inc (NYSE: PPG)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 09/18/2019 |
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| End date: | 09/17/2024 | ||||
| Start price/share: | $119.43 | ||||
| End price/share: | $127.46 | ||||
| Starting shares: | 83.73 | ||||
| Ending shares: | 91.57 | ||||
| Dividends reinvested/share: | $11.81 | ||||
| Total return: | 16.71% | ||||
| Average annual return: | 3.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,672.73 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 3.14%. This would have turned a $10K investment made 5 years ago into $11,672.73 today (as of 09/17/2024). On a total return basis, that’s a result of 16.71% (something to think about: how might PPG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that PPG Industries Inc paid investors a total of $11.81/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 2.72/share, we calculate that PPG has a current yield of approximately 2.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.72 against the original $119.43/share purchase price. This works out to a yield on cost of 1.78%.
Another great investment quote to think about:
“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part-ownership of a business.” — Peter Lynch
