“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 Qualcomm Inc (NASD: QCOM)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 12/14/2000 |
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| End date: | 12/11/2020 | ||||
| Start price/share: | $44.03 | ||||
| End price/share: | $144.28 | ||||
| Starting shares: | 227.12 | ||||
| Ending shares: | 328.82 | ||||
| Dividends reinvested/share: | $22.07 | ||||
| Total return: | 374.42% | ||||
| Average annual return: | 8.09% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,412.78 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 8.09%. This would have turned a $10K investment made 20 years ago into $47,412.78 today (as of 12/11/2020). On a total return basis, that’s a result of 374.42% (something to think about: how might QCOM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Qualcomm Inc paid investors a total of $22.07/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 2.6/share, we calculate that QCOM has a current yield of approximately 1.80%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.6 against the original $44.03/share purchase price. This works out to a yield on cost of 4.09%.
Another great investment quote to think about:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch
