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“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 Halliburton Company (NYSE: HAL)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 03/12/2014
$10,000

03/12/2014
$5,475

03/11/2019
End date: 03/11/2019
Start price/share: $55.39
End price/share: $27.89
Starting shares: 180.54
Ending shares: 196.28
Dividends reinvested/share: $3.54
Total return: -45.26%
Average annual return: -11.35%
Starting investment: $10,000.00
Ending investment: $5,475.12

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -11.35%. This would have turned a $10K investment made 5 years ago into $5,475.12 today (as of 03/11/2019). On a total return basis, that’s a result of -45.26% (something to think about: how might HAL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Halliburton Company paid investors a total of $3.54/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 .72/share, we calculate that HAL has a current yield of approximately 2.58%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $55.39/share purchase price. This works out to a yield on cost of 4.66%.

More investment wisdom to ponder:
“In the long run, we are all dead.” — John Maynard Keynes