“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 decade-long 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 decade-long investment into the stock back in 2011.
| Start date: | 12/05/2011 |
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| End date: | 12/02/2021 | ||||
| Start price/share: | $77.15 | ||||
| End price/share: | $29.32 | ||||
| Starting shares: | 129.62 | ||||
| Ending shares: | 169.16 | ||||
| Dividends reinvested/share: | $15.33 | ||||
| Total return: | -50.40% | ||||
| Average annual return: | -6.77% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $4,960.86 | ||||
As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -6.77%. This would have turned a $10K investment made 10 years ago into $4,960.86 today (as of 12/02/2021). On a total return basis, that’s a result of -50.40% (something to think about: how might SLB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends?Over the past 10 years, Schlumberger Ltd has paid $15.33/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Based upon the most recent annualized dividend rate of .5/share, we calculate that SLB has a current yield of approximately 1.71%. 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 $77.15/share purchase price. This works out to a yield on cost of 2.22%.
Here’s one more great investment quote before you go:
“While it might seem that anyone can be a value investor, the essential characteristics of this type of investor-patience, discipline, and risk aversion-may well be genetically determined.” — Seth Klarman
