“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 HollyFrontier Corp (NYSE: HFC)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 04/14/2016 |
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| End date: | 04/13/2021 | ||||
| Start price/share: | $35.44 | ||||
| End price/share: | $34.64 | ||||
| Starting shares: | 282.17 | ||||
| Ending shares: | 339.94 | ||||
| Dividends reinvested/share: | $6.72 | ||||
| Total return: | 17.76% | ||||
| Average annual return: | 3.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,773.94 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.32%. This would have turned a $10K investment made 5 years ago into $11,773.94 today (as of 04/13/2021). On a total return basis, that’s a result of 17.76% (something to think about: how might HFC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that HollyFrontier Corp paid investors a total of $6.72/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 1.4/share, we calculate that HFC has a current yield of approximately 4.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.4 against the original $35.44/share purchase price. This works out to a yield on cost of 11.40%.
One more piece of investment wisdom to leave you with:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham
