“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 Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 09/05/2017 |
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| End date: | 09/01/2022 | ||||
| Start price/share: | $65.10 | ||||
| End price/share: | $36.85 | ||||
| Starting shares: | 153.61 | ||||
| Ending shares: | 179.25 | ||||
| Dividends reinvested/share: | $6.17 | ||||
| Total return: | -33.94% | ||||
| Average annual return: | -7.97% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $6,606.08 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -7.97%. This would have turned a $10K investment made 5 years ago into $6,606.08 today (as of 09/01/2022). On a total return basis, that’s a result of -33.94% (something to think about: how might SLB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $6.17/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 .7/share, we calculate that SLB has a current yield of approximately 1.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .7 against the original $65.10/share purchase price. This works out to a yield on cost of 2.92%.
One more investment quote to leave you with:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
