“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade 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 two-decade investment into the stock back in 2003.
| Start date: | 09/22/2003 |
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| End date: | 09/21/2023 | ||||
| Start price/share: | $19.47 | ||||
| End price/share: | $20.39 | ||||
| Starting shares: | 513.61 | ||||
| Ending shares: | 812.30 | ||||
| Dividends reinvested/share: | $14.26 | ||||
| Total return: | 65.63% | ||||
| Average annual return: | 2.55% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,551.34 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 2.55%. This would have turned a $10K investment made 20 years ago into $16,551.34 today (as of 09/21/2023). On a total return basis, that’s a result of 65.63% (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 4.12%. 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 $19.47/share purchase price. This works out to a yield on cost of 21.16%.
Another great investment quote to think about:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
