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“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
$10,000

09/08/2003
  $11,520

09/05/2023
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