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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five 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 five year investment into the stock back in 2017.

Start date: 02/28/2017


End date: 02/25/2022
Start price/share: $60.28
End price/share: $29.50
Starting shares: 165.89
Ending shares: 192.31
Dividends reinvested/share: $3.58
Total return: -43.27%
Average annual return: -10.73%
Starting investment: $10,000.00
Ending investment: $5,672.80

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -10.73%. This would have turned a $10K investment made 5 years ago into $5,672.80 today (as of 02/25/2022). On a total return basis, that’s a result of -43.27% (something to think about: how might BKR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Baker Hughes Company paid investors a total of $3.58/share in dividends over the 5 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 2.44%. 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 $60.28/share purchase price. This works out to a yield on cost of 4.05%.

One more piece of investment wisdom to leave you with:
“One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.” — William Feather