“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 |
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| 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
