“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Halliburton Company (NYSE: HAL)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 12/11/2000 |
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| End date: | 12/10/2020 | ||||
| Start price/share: | $18.97 | ||||
| End price/share: | $19.99 | ||||
| Starting shares: | 527.15 | ||||
| Ending shares: | 722.86 | ||||
| Dividends reinvested/share: | $8.76 | ||||
| Total return: | 44.50% | ||||
| Average annual return: | 1.86% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,459.76 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 1.86%. This would have turned a $10K investment made 20 years ago into $14,459.76 today (as of 12/10/2020). On a total return basis, that’s a result of 44.50% (something to think about: how might HAL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Halliburton Company paid investors a total of $8.76/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 .18/share, we calculate that HAL has a current yield of approximately 0.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .18 against the original $18.97/share purchase price. This works out to a yield on cost of 4.74%.
Here’s one more great investment quote before you go:
“Every day that you’re not selling an asset in your portfolio, you’re choosing to buy it.” — Sam Zell
