“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 Juniper Networks Inc (NYSE: JNPR)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 10/20/2000 |
|
|||
| End date: | 10/19/2020 | ||||
| Start price/share: | $232.00 | ||||
| End price/share: | $22.07 | ||||
| Starting shares: | 43.10 | ||||
| Ending shares: | 49.42 | ||||
| Dividends reinvested/share: | $3.48 | ||||
| Total return: | -89.09% | ||||
| Average annual return: | -10.48% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $1,091.13 | ||||
As shown above, the twenty year investment result worked out poorly, with an annualized rate of return of -10.48%. This would have turned a $10K investment made 20 years ago into $1,091.13 today (as of 10/19/2020). On a total return basis, that’s a result of -89.09% (something to think about: how might JNPR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Juniper Networks Inc paid investors a total of $3.48/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 .8/share, we calculate that JNPR has a current yield of approximately 3.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $232.00/share purchase price. This works out to a yield on cost of 1.56%.
More investment wisdom to ponder:
“I make no attempt to forecast the market; my efforts are devoted to finding undervalued securities.” — Warren Buffett
