“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Weyerhaeuser Co (NYSE: WY)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 06/18/1999 |
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| End date: | 06/17/2019 | ||||
| Start price/share: | $69.75 | ||||
| End price/share: | $25.67 | ||||
| Starting shares: | 143.37 | ||||
| Ending shares: | 713.98 | ||||
| Dividends reinvested/share: | $53.61 | ||||
| Total return: | 83.28% | ||||
| Average annual return: | 3.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,314.26 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 3.07%. This would have turned a $10K investment made 20 years ago into $18,314.26 today (as of 06/17/2019). On a total return basis, that’s a result of 83.28% (something to think about: how might WY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Weyerhaeuser Co paid investors a total of $53.61/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 1.36/share, we calculate that WY has a current yield of approximately 5.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.36 against the original $69.75/share purchase price. This works out to a yield on cost of 7.60%.
Here’s one more great investment quote before you go:
“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” — Warren Buffett
