“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Qualcomm Inc (NASD: QCOM)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 07/29/2002 |
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| End date: | 07/26/2022 | ||||
| Start price/share: | $14.07 | ||||
| End price/share: | $149.97 | ||||
| Starting shares: | 710.73 | ||||
| Ending shares: | 1,058.04 | ||||
| Dividends reinvested/share: | $26.18 | ||||
| Total return: | 1,486.74% | ||||
| Average annual return: | 14.82% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $158,737.56 | ||||
The above analysis shows the two-decade investment result worked out quite well, with an annualized rate of return of 14.82%. This would have turned a $10K investment made 20 years ago into $158,737.56 today (as of 07/26/2022). On a total return basis, that’s a result of 1,486.74% (something to think about: how might QCOM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Qualcomm Inc paid investors a total of $26.18/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 3/share, we calculate that QCOM has a current yield of approximately 2.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $14.07/share purchase price. This works out to a yield on cost of 14.21%.
One more investment quote to leave you with:
“Investing is the intersection of economics and psychology.” — Seth Klarman
