“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year 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 twenty year investment into the stock back in 2002.
| Start date: | 03/11/2002 |
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| End date: | 03/08/2022 | ||||
| Start price/share: | $29.37 | ||||
| End price/share: | $45.08 | ||||
| Starting shares: | 340.48 | ||||
| Ending shares: | 503.10 | ||||
| Dividends reinvested/share: | $21.63 | ||||
| Total return: | 126.80% | ||||
| Average annual return: | 4.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,687.39 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.18%. This would have turned a $10K investment made 20 years ago into $22,687.39 today (as of 03/08/2022). On a total return basis, that’s a result of 126.80% (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 $21.63/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 1.11%. 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 $29.37/share purchase price. This works out to a yield on cost of 3.78%.
More investment wisdom to ponder:
“To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks.” — Benjamin Graham
