“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 Citigroup Inc (NYSE: C)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 03/20/2020 |
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| End date: | 03/19/2025 | ||||
| Start price/share: | $38.06 | ||||
| End price/share: | $71.44 | ||||
| Starting shares: | 262.74 | ||||
| Ending shares: | 318.41 | ||||
| Dividends reinvested/share: | $10.43 | ||||
| Total return: | 127.47% | ||||
| Average annual return: | 17.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,751.83 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 17.87%. This would have turned a $10K investment made 5 years ago into $22,751.83 today (as of 03/19/2025). On a total return basis, that’s a result of 127.47% (something to think about: how might C shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Citigroup Inc paid investors a total of $10.43/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 2.24/share, we calculate that C has a current yield of approximately 3.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.24 against the original $38.06/share purchase price. This works out to a yield on cost of 8.25%.
More investment wisdom to ponder:
“Every day that you’re not selling an asset in your portfolio, you’re choosing to buy it.” — Sam Zell
