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“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 Baker Hughes Company (NASD: BKR)? Today, we examine the outcome of a ten year investment into the stock back in 2012.

Start date: 02/09/2012


End date: 02/08/2022
Start price/share: $49.04
End price/share: $27.36
Starting shares: 203.92
Ending shares: 251.42
Dividends reinvested/share: $6.80
Total return: -31.21%
Average annual return: -3.67%
Starting investment: $10,000.00
Ending investment: $6,879.02

The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -3.67%. This would have turned a $10K investment made 10 years ago into $6,879.02 today (as of 02/08/2022). On a total return basis, that’s a result of -31.21% (something to think about: how might BKR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Baker Hughes Company paid investors a total of $6.80/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 .72/share, we calculate that BKR has a current yield of approximately 2.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $49.04/share purchase price. This works out to a yield on cost of 5.36%.

Here’s one more great investment quote before you go:
“You can’t restate a dividend.” — Malon Wilkus