“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into DXC Technology Co (NYSE: DXC)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.
| Start date: | 01/13/2003 |
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| End date: | 01/10/2023 | ||||
| Start price/share: | $17.95 | ||||
| End price/share: | $28.48 | ||||
| Starting shares: | 557.10 | ||||
| Ending shares: | 881.08 | ||||
| Dividends reinvested/share: | $14.26 | ||||
| Total return: | 150.93% | ||||
| Average annual return: | 4.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,111.50 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 4.71%. This would have turned a $10K investment made 20 years ago into $25,111.50 today (as of 01/10/2023). On a total return basis, that’s a result of 150.93% (something to think about: how might DXC shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DXC Technology Co paid investors a total of $14.26/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 .84/share, we calculate that DXC has a current yield of approximately 2.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .84 against the original $17.95/share purchase price. This works out to a yield on cost of 16.43%.
Another great investment quote to think about:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman
