“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 Qualcomm Inc (NASD: QCOM)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 01/06/2000 |
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| End date: | 01/03/2020 | ||||
| Start price/share: | $70.03 | ||||
| End price/share: | $87.02 | ||||
| Starting shares: | 142.80 | ||||
| Ending shares: | 201.67 | ||||
| Dividends reinvested/share: | $19.50 | ||||
| Total return: | 75.49% | ||||
| Average annual return: | 2.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,544.98 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 2.85%. This would have turned a $10K investment made 20 years ago into $17,544.98 today (as of 01/03/2020). On a total return basis, that’s a result of 75.49% (something to think about: how might QCOM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Qualcomm Inc paid investors a total of $19.50/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 2.48/share, we calculate that QCOM has a current yield of approximately 2.85%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.48 against the original $70.03/share purchase price. This works out to a yield on cost of 4.07%.
More investment wisdom to ponder:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett
