“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 Expedia Group Inc (NASD: EXPE)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 07/10/2018 |
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| End date: | 07/07/2023 | ||||
| Start price/share: | $127.26 | ||||
| End price/share: | $111.88 | ||||
| Starting shares: | 78.58 | ||||
| Ending shares: | 80.21 | ||||
| Dividends reinvested/share: | $2.30 | ||||
| Total return: | -10.27% | ||||
| Average annual return: | -2.15% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,971.31 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -2.15%. This would have turned a $10K investment made 5 years ago into $8,971.31 today (as of 07/07/2023). On a total return basis, that’s a result of -10.27% (something to think about: how might EXPE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Expedia Group Inc paid investors a total of $2.30/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 1.36/share, we calculate that EXPE has a current yield of approximately 1.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.36 against the original $127.26/share purchase price. This works out to a yield on cost of 0.96%.
More investment wisdom to ponder:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham
