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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 Williams Cos Inc (NYSE: WMB)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 12/23/2015


End date: 12/22/2020
Start price/share: $25.34
End price/share: $20.61
Starting shares: 394.63
Ending shares: 544.77
Dividends reinvested/share: $7.36
Total return: 12.28%
Average annual return: 2.34%
Starting investment: $10,000.00
Ending investment: $11,226.76

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 2.34%. This would have turned a $10K investment made 5 years ago into $11,226.76 today (as of 12/22/2020). On a total return basis, that’s a result of 12.28% (something to think about: how might WMB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Williams Cos Inc paid investors a total of $7.36/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 1.6/share, we calculate that WMB has a current yield of approximately 7.76%. 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 $25.34/share purchase price. This works out to a yield on cost of 30.62%.

Another great investment quote to think about:
“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Davis