“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Walmart Inc (NYSE: WMT)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 01/03/2000 |
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| End date: | 01/02/2020 | ||||
| Start price/share: | $66.81 | ||||
| End price/share: | $118.94 | ||||
| Starting shares: | 149.67 | ||||
| Ending shares: | 215.55 | ||||
| Dividends reinvested/share: | $24.16 | ||||
| Total return: | 156.38% | ||||
| Average annual return: | 4.82% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,651.17 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.82%. This would have turned a $10K investment made 20 years ago into $25,651.17 today (as of 01/02/2020). On a total return basis, that’s a result of 156.38% (something to think about: how might WMT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walmart Inc paid investors a total of $24.16/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 2.12/share, we calculate that WMT has a current yield of approximately 1.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.12 against the original $66.81/share purchase price. This works out to a yield on cost of 2.66%.
Another great investment quote to think about:
“Never test the depth of a river with both feet.” — Warren Buffett
