“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Walgreens Boots Alliance Inc (NASD: WBA)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 01/07/2011 |
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| End date: | 01/06/2021 | ||||
| Start price/share: | $40.08 | ||||
| End price/share: | $43.03 | ||||
| Starting shares: | 249.50 | ||||
| Ending shares: | 319.31 | ||||
| Dividends reinvested/share: | $14.03 | ||||
| Total return: | 37.40% | ||||
| Average annual return: | 3.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,744.69 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 3.23%. This would have turned a $10K investment made 10 years ago into $13,744.69 today (as of 01/06/2021). On a total return basis, that’s a result of 37.40% (something to think about: how might WBA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walgreens Boots Alliance Inc paid investors a total of $14.03/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 1.87/share, we calculate that WBA has a current yield of approximately 4.35%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.87 against the original $40.08/share purchase price. This works out to a yield on cost of 10.85%.
Another great investment quote to think about:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger
