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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 Walgreens Boots Alliance Inc (NASD: WBA)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 09/04/2015


End date: 09/03/2020
Start price/share: $87.43
End price/share: $37.09
Starting shares: 114.38
Ending shares: 130.00
Dividends reinvested/share: $8.24
Total return: -51.78%
Average annual return: -13.57%
Starting investment: $10,000.00
Ending investment: $4,821.13

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -13.57%. This would have turned a $10K investment made 5 years ago into $4,821.13 today (as of 09/03/2020). On a total return basis, that’s a result of -51.78% (something to think about: how might WBA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Walgreens Boots Alliance Inc paid investors a total of $8.24/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 1.87/share, we calculate that WBA has a current yield of approximately 5.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.87 against the original $87.43/share purchase price. This works out to a yield on cost of 5.76%.

One more investment quote to leave you with:
“When you sell in desperation, you always sell cheap.” — Peter Lynch