“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 Target Corp (NYSE: TGT)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 01/03/2020 |
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| End date: | 01/02/2025 | ||||
| Start price/share: | $124.76 | ||||
| End price/share: | $137.19 | ||||
| Starting shares: | 80.15 | ||||
| Ending shares: | 90.05 | ||||
| Dividends reinvested/share: | $18.60 | ||||
| Total return: | 23.54% | ||||
| Average annual return: | 4.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,356.29 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 4.32%. This would have turned a $10K investment made 5 years ago into $12,356.29 today (as of 01/02/2025). On a total return basis, that’s a result of 23.54% (something to think about: how might TGT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Target Corp paid investors a total of $18.60/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 4.48/share, we calculate that TGT has a current yield of approximately 3.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.48 against the original $124.76/share purchase price. This works out to a yield on cost of 2.62%.
Another great investment quote to think about:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis
