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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 Williams Cos Inc (NYSE: WMB)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 04/07/2014
$10,000

04/07/2014
$9,621

04/04/2019
End date: 04/04/2019
Start price/share: $39.64
End price/share: $28.82
Starting shares: 252.27
Ending shares: 333.76
Dividends reinvested/share: $8.62
Total return: -3.81%
Average annual return: -0.77%
Starting investment: $10,000.00
Ending investment: $9,621.29

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -0.77%. This would have turned a $10K investment made 5 years ago into $9,621.29 today (as of 04/04/2019). On a total return basis, that’s a result of -3.81% (something to think about: how might WMB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Williams Cos Inc paid investors a total of $8.62/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 1.52/share, we calculate that WMB has a current yield of approximately 5.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.52 against the original $39.64/share purchase price. This works out to a yield on cost of 13.29%.

One more investment quote to leave you with:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks