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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2019, investors considering an investment into shares of Johnson Controls International plc (NYSE: JCI) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 12/23/2019
$10,000

12/23/2019
  $21,858

12/20/2024
End date: 12/20/2024
Start price/share: $41.21
End price/share: $80.64
Starting shares: 242.66
Ending shares: 271.12
Dividends reinvested/share: $6.17
Total return: 118.63%
Average annual return: 16.94%
Starting investment: $10,000.00
Ending investment: $21,858.95

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 16.94%. This would have turned a $10K investment made 5 years ago into $21,858.95 today (as of 12/20/2024). On a total return basis, that’s a result of 118.63% (something to think about: how might JCI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Johnson Controls International plc paid investors a total of $6.17/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 1.48/share, we calculate that JCI has a current yield of approximately 1.84%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $41.21/share purchase price. This works out to a yield on cost of 4.46%.

More investment wisdom to ponder:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis