“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 Wynn Resorts Ltd (NASD: WYNN)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 08/15/2014 |
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| End date: | 08/14/2019 | ||||
| Start price/share: | $201.33 | ||||
| End price/share: | $104.33 | ||||
| Starting shares: | 49.67 | ||||
| Ending shares: | 55.63 | ||||
| Dividends reinvested/share: | $14.00 | ||||
| Total return: | -41.96% | ||||
| Average annual return: | -10.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,803.90 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -10.31%. This would have turned a $10K investment made 5 years ago into $5,803.90 today (as of 08/14/2019). On a total return basis, that’s a result of -41.96% (something to think about: how might WYNN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Wynn Resorts Ltd paid investors a total of $14.00/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 4/share, we calculate that WYNN has a current yield of approximately 3.83%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4 against the original $201.33/share purchase price. This works out to a yield on cost of 1.90%.
Here’s one more great investment quote before you go:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
