“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 Halliburton Company (NYSE: HAL)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 12/20/2011 |
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| End date: | 12/17/2021 | ||||
| Start price/share: | $33.21 | ||||
| End price/share: | $22.11 | ||||
| Starting shares: | 301.11 | ||||
| Ending shares: | 354.49 | ||||
| Dividends reinvested/share: | $5.61 | ||||
| Total return: | -21.62% | ||||
| Average annual return: | -2.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,835.26 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -2.41%. This would have turned a $10K investment made 10 years ago into $7,835.26 today (as of 12/17/2021). On a total return basis, that’s a result of -21.62% (something to think about: how might HAL shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Halliburton Company paid investors a total of $5.61/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 .18/share, we calculate that HAL has a current yield of approximately 0.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .18 against the original $33.21/share purchase price. This works out to a yield on cost of 2.44%.
One more piece of investment wisdom to leave you with:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt
