“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 Boeing Co. (NYSE: BA)? 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: | $147.96 | ||||
| End price/share: | $121.50 | ||||
| Starting shares: | 67.59 | ||||
| Ending shares: | 76.34 | ||||
| Dividends reinvested/share: | $28.98 | ||||
| Total return: | -7.24% | ||||
| Average annual return: | -1.49% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,276.49 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -1.49%. This would have turned a $10K investment made 5 years ago into $9,276.49 today (as of 05/13/2020). On a total return basis, that’s a result of -7.24% (something to think about: how might BA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Boeing Co. paid investors a total of $28.98/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 8.22/share, we calculate that BA has a current yield of approximately 6.77%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8.22 against the original $147.96/share purchase price. This works out to a yield on cost of 4.58%.
One more investment quote to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
