“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a decade-long investment into the stock back in 2014.
| Start date: | 05/09/2014 |
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| End date: | 05/08/2024 | ||||
| Start price/share: | $100.22 | ||||
| End price/share: | $47.86 | ||||
| Starting shares: | 99.78 | ||||
| Ending shares: | 130.79 | ||||
| Dividends reinvested/share: | $14.50 | ||||
| Total return: | -37.40% | ||||
| Average annual return: | -4.57% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $6,262.36 | ||||
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -4.57%. This would have turned a $10K investment made 10 years ago into $6,262.36 today (as of 05/08/2024). On a total return basis, that’s a result of -37.40% (something to think about: how might SLB shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $14.50/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 1.1/share, we calculate that SLB has a current yield of approximately 2.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.1 against the original $100.22/share purchase price. This works out to a yield on cost of 2.29%.
More investment wisdom to ponder:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
