“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
| Start date: | 06/11/2001 |
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| End date: | 06/08/2021 | ||||
| Start price/share: | $29.90 | ||||
| End price/share: | $35.90 | ||||
| Starting shares: | 334.45 | ||||
| Ending shares: | 493.60 | ||||
| Dividends reinvested/share: | $21.53 | ||||
| Total return: | 77.20% | ||||
| Average annual return: | 2.90% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,716.40 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 2.90%. This would have turned a $10K investment made 20 years ago into $17,716.40 today (as of 06/08/2021). On a total return basis, that’s a result of 77.20% (something to think about: how might SLB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $21.53/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 .5/share, we calculate that SLB has a current yield of approximately 1.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $29.90/share purchase price. This works out to a yield on cost of 4.65%.
Here’s one more great investment quote before you go:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman
