“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 two-decade 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 two-decade investment into the stock back in 2001.
| Start date: | 09/04/2001 |
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| End date: | 08/31/2021 | ||||
| Start price/share: | $25.19 | ||||
| End price/share: | $28.04 | ||||
| Starting shares: | 396.98 | ||||
| Ending shares: | 586.26 | ||||
| Dividends reinvested/share: | $21.56 | ||||
| Total return: | 64.39% | ||||
| Average annual return: | 2.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,451.35 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 2.52%. This would have turned a $10K investment made 20 years ago into $16,451.35 today (as of 08/31/2021). On a total return basis, that’s a result of 64.39% (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 $21.56/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 1.78%. 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 $25.19/share purchase price. This works out to a yield on cost of 7.07%.
Here’s one more great investment quote before you go:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
