“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Hartford Financial Services Group Inc. (NYSE: HIG)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.
| Start date: | 07/10/2003 |
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| End date: | 07/07/2023 | ||||
| Start price/share: | $51.14 | ||||
| End price/share: | $72.73 | ||||
| Starting shares: | 195.54 | ||||
| Ending shares: | 301.23 | ||||
| Dividends reinvested/share: | $20.90 | ||||
| Total return: | 119.08% | ||||
| Average annual return: | 4.00% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $21,915.94 | ||||
As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 4.00%. This would have turned a $10K investment made 20 years ago into $21,915.94 today (as of 07/07/2023). On a total return basis, that’s a result of 119.08% (something to think about: how might HIG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hartford Financial Services Group Inc. paid investors a total of $20.90/share in dividends over the 20 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 1.7/share, we calculate that HIG has a current yield of approximately 2.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.7 against the original $51.14/share purchase price. This works out to a yield on cost of 4.58%.
One more piece of investment wisdom to leave you with:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett
