“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Western Digital Corp (NASD: WDC)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 11/16/2012 |
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| End date: | 11/15/2022 | ||||
| Start price/share: | $34.58 | ||||
| End price/share: | $39.46 | ||||
| Starting shares: | 289.18 | ||||
| Ending shares: | 357.16 | ||||
| Dividends reinvested/share: | $13.30 | ||||
| Total return: | 40.93% | ||||
| Average annual return: | 3.49% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,093.69 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 3.49%. This would have turned a $10K investment made 10 years ago into $14,093.69 today (as of 11/15/2022). On a total return basis, that’s a result of 40.93% (something to think about: how might WDC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Western Digital Corp paid investors a total of $13.30/share in dividends over the 10 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 2/share, we calculate that WDC has a current yield of approximately 5.07%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $34.58/share purchase price. This works out to a yield on cost of 14.66%.
One more piece of investment wisdom to leave you with:
“In the end, how your investments behave is much less important than how you behave.” — Benjamin Graham
