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“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 BorgWarner Inc (NYSE: BWA)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 05/14/2015


End date: 05/13/2020
Start price/share: $61.66
End price/share: $26.34
Starting shares: 162.18
Ending shares: 174.84
Dividends reinvested/share: $3.04
Total return: -53.95%
Average annual return: -14.36%
Starting investment: $10,000.00
Ending investment: $4,604.67

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -14.36%. This would have turned a $10K investment made 5 years ago into $4,604.67 today (as of 05/13/2020). On a total return basis, that’s a result of -53.95% (something to think about: how might BWA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that BorgWarner Inc paid investors a total of $3.04/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 .68/share, we calculate that BWA has a current yield of approximately 2.58%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $61.66/share purchase price. This works out to a yield on cost of 4.18%.

One more piece of investment wisdom to leave you with:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher