“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 11/08/2010 |
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| End date: | 11/05/2020 | ||||
| Start price/share: | $74.84 | ||||
| End price/share: | $15.52 | ||||
| Starting shares: | 133.62 | ||||
| Ending shares: | 172.99 | ||||
| Dividends reinvested/share: | $15.91 | ||||
| Total return: | -73.15% | ||||
| Average annual return: | -12.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,685.38 | ||||
The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -12.32%. This would have turned a $10K investment made 10 years ago into $2,685.38 today (as of 11/05/2020). On a total return basis, that’s a result of -73.15% (something to think about: how might SLB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $15.91/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 .5/share, we calculate that SLB has a current yield of approximately 3.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $74.84/share purchase price. This works out to a yield on cost of 4.30%.
One more piece of investment wisdom to leave you with:
“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” — Warren Buffett
