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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 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
$10,000

01/06/2000
$17,544

01/03/2020
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