“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year 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 ten year investment into the stock back in 2013.
| Start date: | 11/08/2013 |
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| End date: | 11/07/2023 | ||||
| Start price/share: | $59.70 | ||||
| End price/share: | $21.65 | ||||
| Starting shares: | 167.50 | ||||
| Ending shares: | 227.72 | ||||
| Dividends reinvested/share: | $16.61 | ||||
| Total return: | -50.70% | ||||
| Average annual return: | -6.83% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $4,928.07 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -6.83%. This would have turned a $10K investment made 10 years ago into $4,928.07 today (as of 11/07/2023). On a total return basis, that’s a result of -50.70% (something to think about: how might WBA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walgreens Boots Alliance Inc paid investors a total of $16.61/share in dividends over the 10 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 8.87%. 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 $59.70/share purchase price. This works out to a yield on cost of 14.86%.
More investment wisdom to ponder:
“When you sell in desperation, you always sell cheap.” — Peter Lynch
