“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 T. Rowe Price Group Inc (NASD: TROW)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 09/26/2019 |
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| End date: | 09/25/2024 | ||||
| Start price/share: | $112.03 | ||||
| End price/share: | $107.46 | ||||
| Starting shares: | 89.26 | ||||
| Ending shares: | 108.10 | ||||
| Dividends reinvested/share: | $25.08 | ||||
| Total return: | 16.16% | ||||
| Average annual return: | 3.04% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,616.22 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.04%. This would have turned a $10K investment made 5 years ago into $11,616.22 today (as of 09/25/2024). On a total return basis, that’s a result of 16.16% (something to think about: how might TROW shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that T. Rowe Price Group Inc paid investors a total of $25.08/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 4.96/share, we calculate that TROW has a current yield of approximately 4.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.96 against the original $112.03/share purchase price. This works out to a yield on cost of 4.12%.
One more piece of investment wisdom to leave you with:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
