“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 Stanley Black & Decker Inc (NYSE: SWK)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 09/22/2017 |
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| End date: | 09/21/2022 | ||||
| Start price/share: | $151.22 | ||||
| End price/share: | $83.46 | ||||
| Starting shares: | 66.13 | ||||
| Ending shares: | 72.84 | ||||
| Dividends reinvested/share: | $14.05 | ||||
| Total return: | -39.20% | ||||
| Average annual return: | -9.47% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $6,080.83 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -9.47%. This would have turned a $10K investment made 5 years ago into $6,080.83 today (as of 09/21/2022). On a total return basis, that’s a result of -39.20% (something to think about: how might SWK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Stanley Black & Decker Inc paid investors a total of $14.05/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 3.2/share, we calculate that SWK has a current yield of approximately 3.83%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.2 against the original $151.22/share purchase price. This works out to a yield on cost of 2.53%.
Here’s one more great investment quote before you go:
“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
