“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 BorgWarner Inc (NYSE: BWA)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 02/02/2011 |
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| End date: | 02/01/2021 | ||||
| Start price/share: | $32.87 | ||||
| End price/share: | $42.08 | ||||
| Starting shares: | 304.23 | ||||
| Ending shares: | 337.84 | ||||
| Dividends reinvested/share: | $4.44 | ||||
| Total return: | 42.16% | ||||
| Average annual return: | 3.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,218.14 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 3.58%. This would have turned a $10K investment made 10 years ago into $14,218.14 today (as of 02/01/2021). On a total return basis, that’s a result of 42.16% (something to think about: how might BWA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that BorgWarner Inc paid investors a total of $4.44/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 .68/share, we calculate that BWA has a current yield of approximately 1.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $32.87/share purchase price. This works out to a yield on cost of 4.93%.
One more investment quote to leave you with:
“Invest for the long haul. Don’t get too greedy and don’t get too scared.” — Shelby Davis
