“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Williams Cos Inc (NYSE: WMB)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.
| Start date: | 09/02/2010 |
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| End date: | 09/01/2020 | ||||
| Start price/share: | $15.59 | ||||
| End price/share: | $20.96 | ||||
| Starting shares: | 641.44 | ||||
| Ending shares: | 1,056.04 | ||||
| Dividends reinvested/share: | $14.34 | ||||
| Total return: | 121.35% | ||||
| Average annual return: | 8.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,144.73 | ||||
The above analysis shows the decade-long investment result worked out well, with an annualized rate of return of 8.27%. This would have turned a $10K investment made 10 years ago into $22,144.73 today (as of 09/01/2020). On a total return basis, that’s a result of 121.35% (something to think about: how might WMB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Williams Cos Inc paid investors a total of $14.34/share in dividends over the 10 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 1.6/share, we calculate that WMB has a current yield of approximately 7.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $15.59/share purchase price. This works out to a yield on cost of 48.94%.
Here’s one more great investment quote before you go:
“Successful investing is anticipating the anticipations of others.” — John Maynard Keynes
