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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 Newell Brands Inc (NASD: NWL)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 03/18/1999
$10,000

03/18/1999
$5,608

03/15/2019
End date: 03/15/2019
Start price/share: $48.44
End price/share: $15.56
Starting shares: 206.45
Ending shares: 360.69
Dividends reinvested/share: $14.15
Total return: -43.88%
Average annual return: -2.85%
Starting investment: $10,000.00
Ending investment: $5,608.18

As shown above, the twenty year investment result worked out poorly, with an annualized rate of return of -2.85%. This would have turned a $10K investment made 20 years ago into $5,608.18 today (as of 03/15/2019). On a total return basis, that’s a result of -43.88% (something to think about: how might NWL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Newell Brands Inc paid investors a total of $14.15/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 .92/share, we calculate that NWL has a current yield of approximately 5.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .92 against the original $48.44/share purchase price. This works out to a yield on cost of 12.20%.

Another great investment quote to think about:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch