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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 Willis Towers Watson Public Ltd Co (NASD: WLTW)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 07/02/2014


End date: 07/01/2019
Start price/share: $279.97
End price/share: $193.94
Starting shares: 35.72
Ending shares: 40.90
Dividends reinvested/share: $36.61
Total return: -20.68%
Average annual return: -4.53%
Starting investment: $10,000.00
Ending investment: $7,931.12

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -4.53%. This would have turned a $10K investment made 5 years ago into $7,931.12 today (as of 07/01/2019). On a total return basis, that’s a result of -20.68% (something to think about: how might WLTW shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Willis Towers Watson Public Ltd Co paid investors a total of $36.61/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 2.6/share, we calculate that WLTW has a current yield of approximately 1.34%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.6 against the original $279.97/share purchase price. This works out to a yield on cost of 0.48%.

Another great investment quote to think about:
“Markets are constantly in a state of uncertainty and flux and money is made by discounting the obvious and betting on the unexpected.” — George Soros