“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into KeyCorp (NYSE: KEY) back in 2020: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.
| Start date: | 07/02/2020 |
|
|||
| End date: | 07/01/2025 | ||||
| Start price/share: | $11.71 | ||||
| End price/share: | $17.87 | ||||
| Starting shares: | 853.97 | ||||
| Ending shares: | 1,092.03 | ||||
| Dividends reinvested/share: | $3.96 | ||||
| Total return: | 95.15% | ||||
| Average annual return: | 14.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,517.36 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 14.31%. This would have turned a $10K investment made 5 years ago into $19,517.36 today (as of 07/01/2025). On a total return basis, that’s a result of 95.15% (something to think about: how might KEY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that KeyCorp paid investors a total of $3.96/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 .82/share, we calculate that KEY has a current yield of approximately 4.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .82 against the original $11.71/share purchase price. This works out to a yield on cost of 39.20%.
Here’s one more great investment quote before you go:
“Know what you own and why you own it.” — Peter Lynch
