“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?
Today, let’s look backwards in time to 2002, and take a look at what happened to investors who asked that very question about Weyerhaeuser Co (NYSE: WY), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 08/16/2002 |
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| End date: | 08/15/2022 | ||||
| Start price/share: | $54.56 | ||||
| End price/share: | $36.95 | ||||
| Starting shares: | 183.28 | ||||
| Ending shares: | 936.72 | ||||
| Dividends reinvested/share: | $52.59 | ||||
| Total return: | 246.12% | ||||
| Average annual return: | 6.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,604.12 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 6.40%. This would have turned a $10K investment made 20 years ago into $34,604.12 today (as of 08/15/2022). On a total return basis, that’s a result of 246.12% (something to think about: how might WY shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Weyerhaeuser Co paid investors a total of $52.59/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 .72/share, we calculate that WY has a current yield of approximately 1.95%. 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 $54.56/share purchase price. This works out to a yield on cost of 3.57%.
Another great investment quote to think about:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John
