“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 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 Walgreens Boots Alliance Inc (NASD: WBA)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 09/08/2003 |
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| End date: | 09/05/2023 | ||||
| Start price/share: | $30.97 | ||||
| End price/share: | $22.73 | ||||
| Starting shares: | 322.89 | ||||
| Ending shares: | 506.76 | ||||
| Dividends reinvested/share: | $21.93 | ||||
| Total return: | 15.19% | ||||
| Average annual return: | 0.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,520.43 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 0.71%. This would have turned a $10K investment made 20 years ago into $11,520.43 today (as of 09/05/2023). On a total return basis, that’s a result of 15.19% (something to think about: how might WBA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walgreens Boots Alliance Inc paid investors a total of $21.93/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 1.92/share, we calculate that WBA has a current yield of approximately 8.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $30.97/share purchase price. This works out to a yield on cost of 27.28%.
Another great investment quote to think about:
“The most important thing about an investment philosophy is that you have one.” — David Booth
