“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 Weyerhaeuser Co (NYSE: WY)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 11/19/2014 |
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| End date: | 11/18/2019 | ||||
| Start price/share: | $34.20 | ||||
| End price/share: | $29.62 | ||||
| Starting shares: | 292.40 | ||||
| Ending shares: | 356.47 | ||||
| Dividends reinvested/share: | $6.03 | ||||
| Total return: | 5.59% | ||||
| Average annual return: | 1.09% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,557.01 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 1.09%. This would have turned a $10K investment made 5 years ago into $10,557.01 today (as of 11/18/2019). On a total return basis, that’s a result of 5.59% (something to think about: how might WY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Weyerhaeuser Co paid investors a total of $6.03/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 1.36/share, we calculate that WY has a current yield of approximately 4.59%. 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 $34.20/share purchase price. This works out to a yield on cost of 13.42%.
Another great investment quote to think about:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru
