“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year buy-and-hold investment in Howmet Aerospace Inc (NYSE: HWM) produced an exceptionally strong result. Based on the return profile shown below, a $10,000 investment made on 08/17/2021 and held through 08/14/2026, with dividends reinvested, would have grown to $93,202.14. That equates to an 831.96% total return and an average annual return of 56.35%.
The exercise illustrates a central point of long-term equity investing: over multi-year periods, business performance and market re-rating can matter far more than short-term price fluctuations. In Howmet Aerospace’s case, the overwhelming driver of the return was capital appreciation, with dividends contributing a comparatively small but still measurable increment through reinvestment.
HWM 5-Year Return Details
| Start date: | 08/17/2021 |
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| End date: | 08/14/2026 | ||||
| Start price/share: | $31.48 | ||||
| End price/share: | $289.18 | ||||
| Starting shares: | 317.66 | ||||
| Ending shares: | 322.28 | ||||
| Dividends reinvested/share: | $1.37 | ||||
| Total return: | 831.96% | ||||
| Average annual return: | 56.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $93,202.14 | ||||
Put simply, HWM multiplied the original investment by more than nine times over the period. Share price appreciation accounted for nearly all of that gain: the stock rose from $31.48 to $289.18, while dividend reinvestment increased the share count only modestly, from 317.66 shares to 322.28 shares.
What Drove the Return
The return profile underscores an important distinction in total-return analysis. A stock can generate excellent long-term results even when its cash yield is low, provided the underlying business delivers enough earnings growth, margin expansion, cash flow improvement, or valuation re-rating to support a materially higher share price.
For Howmet Aerospace, the dividend contribution over the five-year period was limited in absolute terms. Investors received $1.37 per share in dividends during the holding period examined here, and those cash payments were assumed to be reinvested using closing prices on the ex-dividend dates. That reinvestment added incremental value, but the dominant force was the stock’s advance in price.
How Dividend Reinvestment Affected Results
Dividend reinvestment matters most when either the starting yield is substantial or the holding period is long enough for compounding to become a major factor. In this case, reinvestment played a secondary role because HWM’s yield was low relative to the scale of the stock’s capital gain.
The mechanics are straightforward:
- Cash dividends were paid during the period.
- Those dividends were assumed to be reinvested into additional HWM shares.
- The additional shares then participated in subsequent price appreciation and future dividends.
Even when the dividend stream is modest, reinvestment ensures that total return is measured more completely than a price-only comparison.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $0.56 per share, HWM has a current yield of approximately 0.19% using the ending share price shown above. Measured against the original purchase price of $31.48 per share, that same annualized dividend implies a yield on cost of about 1.78%.
Yield on cost can be a useful descriptive metric for showing how a growing dividend stream relates to an investor’s original entry price. However, it should not be confused with the stock’s current market yield, which remains the relevant measure for evaluating the income generated by new capital invested today.
Key Takeaways From This HWM Buy-and-Hold Example
- Howmet Aerospace delivered an 831.96% total return over the five-year period measured.
- A $10,000 starting investment grew to $93,202.14 with dividends reinvested.
- The result was driven primarily by share price appreciation rather than dividend income.
- HWM’s low current yield did not prevent the stock from producing outstanding total returns.
That combination makes this a useful case study in why total return analysis matters. For some companies, dividends are the central component of shareholder return. For others, especially businesses where valuation and operating performance improve sharply over time, the larger contribution comes from capital appreciation. Howmet Aerospace fell decisively into the latter category during this five-year span.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman
