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“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 BorgWarner Inc (NYSE: BWA)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 06/24/2016


End date: 06/23/2021
Start price/share: $30.50
End price/share: $48.44
Starting shares: 327.87
Ending shares: 355.23
Dividends reinvested/share: $3.24
Total return: 72.08%
Average annual return: 11.47%
Starting investment: $10,000.00
Ending investment: $17,210.36

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 11.47%. This would have turned a $10K investment made 5 years ago into $17,210.36 today (as of 06/23/2021). On a total return basis, that’s a result of 72.08% (something to think about: how might BWA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that BorgWarner Inc paid investors a total of $3.24/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 .68/share, we calculate that BWA has a current yield of approximately 1.40%. 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 $30.50/share purchase price. This works out to a yield on cost of 4.59%.

Another great investment quote to think about:
“If you’re looking for a home run, a great investment for five years or 10 years or more, then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.” — Ralph Wanger