“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 Qualcomm Inc (NASD: QCOM)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 03/09/2016 |
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| End date: | 03/08/2021 | ||||
| Start price/share: | $51.95 | ||||
| End price/share: | $123.20 | ||||
| Starting shares: | 192.49 | ||||
| Ending shares: | 227.81 | ||||
| Dividends reinvested/share: | $11.96 | ||||
| Total return: | 180.66% | ||||
| Average annual return: | 22.92% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $28,061.62 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 22.92%. This would have turned a $10K investment made 5 years ago into $28,061.62 today (as of 03/08/2021). On a total return basis, that’s a result of 180.66% (something to think about: how might QCOM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Qualcomm Inc paid investors a total of $11.96/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 2.6/share, we calculate that QCOM has a current yield of approximately 2.11%. 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 $51.95/share purchase price. This works out to a yield on cost of 4.06%.
Another great investment quote to think about:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
