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“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 Skyworks Solutions Inc (NASD: SWKS)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 06/15/2018
$10,000

06/15/2018
  $11,711

06/14/2023
End date: 06/14/2023
Start price/share: $102.70
End price/share: $109.89
Starting shares: 97.37
Ending shares: 106.59
Dividends reinvested/share: $10.00
Total return: 17.13%
Average annual return: 3.21%
Starting investment: $10,000.00
Ending investment: $11,711.40

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.21%. This would have turned a $10K investment made 5 years ago into $11,711.40 today (as of 06/14/2023). On a total return basis, that’s a result of 17.13% (something to think about: how might SWKS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Skyworks Solutions Inc paid investors a total of $10.00/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 2.48/share, we calculate that SWKS has a current yield of approximately 2.26%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.48 against the original $102.70/share purchase price. This works out to a yield on cost of 2.20%.

Another great investment quote to think about:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher