“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 Wells Fargo & Co (NYSE: WFC)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 04/02/2020 |
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| End date: | 04/01/2025 | ||||
| Start price/share: | $27.22 | ||||
| End price/share: | $71.31 | ||||
| Starting shares: | 367.38 | ||||
| Ending shares: | 417.32 | ||||
| Dividends reinvested/share: | $5.61 | ||||
| Total return: | 197.59% | ||||
| Average annual return: | 24.37% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $29,756.25 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 24.37%. This would have turned a $10K investment made 5 years ago into $29,756.25 today (as of 04/01/2025). On a total return basis, that’s a result of 197.59% (something to think about: how might WFC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Wells Fargo & Co paid investors a total of $5.61/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 1.6/share, we calculate that WFC has a current yield of approximately 2.24%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $27.22/share purchase price. This works out to a yield on cost of 8.23%.
One more piece of investment wisdom to leave you with:
“Most investors want to do today what they should have done yesterday.” — Larry Summers
