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“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 Walgreens Boots Alliance Inc (NASD: WBA)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 12/27/2018


End date: 12/26/2023
Start price/share: $68.36
End price/share: $26.61
Starting shares: 146.28
Ending shares: 183.74
Dividends reinvested/share: $9.38
Total return: -51.11%
Average annual return: -13.33%
Starting investment: $10,000.00
Ending investment: $4,890.40

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -13.33%. This would have turned a $10K investment made 5 years ago into $4,890.40 today (as of 12/26/2023). On a total return basis, that’s a result of -51.11% (something to think about: how might WBA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Walgreens Boots Alliance Inc paid investors a total of $9.38/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 1.92/share, we calculate that WBA has a current yield of approximately 7.22%. 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 $68.36/share purchase price. This works out to a yield on cost of 10.56%.

One more piece of investment wisdom to leave you with:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks