“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: | 08/16/1999 |
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| End date: | 08/14/2019 | ||||
| Start price/share: | $63.38 | ||||
| End price/share: | $24.50 | ||||
| Starting shares: | 157.79 | ||||
| Ending shares: | 781.08 | ||||
| Dividends reinvested/share: | $53.21 | ||||
| Total return: | 91.36% | ||||
| Average annual return: | 3.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,147.95 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 3.30%. This would have turned a $10K investment made 20 years ago into $19,147.95 today (as of 08/14/2019). On a total return basis, that’s a result of 91.36% (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 $53.21/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 5.55%. 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 $63.38/share purchase price. This works out to a yield on cost of 8.76%.
More investment wisdom to ponder:
“I make no attempt to forecast the market; my efforts are devoted to finding undervalued securities.” — Warren Buffett
