“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 Cintas Corporation (NASD: CTAS)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 08/22/2018 |
|
|||
| End date: | 08/21/2023 | ||||
| Start price/share: | $212.42 | ||||
| End price/share: | $486.02 | ||||
| Starting shares: | 47.08 | ||||
| Ending shares: | 49.90 | ||||
| Dividends reinvested/share: | $19.36 | ||||
| Total return: | 142.52% | ||||
| Average annual return: | 19.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,246.99 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 19.38%. This would have turned a $10K investment made 5 years ago into $24,246.99 today (as of 08/21/2023). On a total return basis, that’s a result of 142.52% (something to think about: how might CTAS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cintas Corporation paid investors a total of $19.36/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 5.4/share, we calculate that CTAS has a current yield of approximately 1.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.4 against the original $212.42/share purchase price. This works out to a yield on cost of 0.52%.
More investment wisdom to ponder:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
