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“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 HP Inc (NYSE: HPQ)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.

Start date: 07/26/1999


End date: 07/23/2019
Start price/share: $48.00
End price/share: $21.63
Starting shares: 208.33
Ending shares: 294.15
Dividends reinvested/share: $5.12
Total return: -36.38%
Average annual return: -2.23%
Starting investment: $10,000.00
Ending investment: $6,368.82

As we can see, the two-decade investment result worked out poorly, with an annualized rate of return of -2.23%. This would have turned a $10K investment made 20 years ago into $6,368.82 today (as of 07/23/2019). On a total return basis, that’s a result of -36.38% (something to think about: how might HPQ shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that HP Inc paid investors a total of $5.12/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 .6408/share, we calculate that HPQ has a current yield of approximately 2.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6408 against the original $48.00/share purchase price. This works out to a yield on cost of 6.17%.

Another great investment quote to think about:
“Money is better than poverty, if only for financial reasons.” — Woody Allen