“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 Boeing Co. (NYSE: BA)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 08/22/2014 |
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| End date: | 08/21/2024 | ||||
| Start price/share: | $127.46 | ||||
| End price/share: | $173.43 | ||||
| Starting shares: | 78.46 | ||||
| Ending shares: | 90.27 | ||||
| Dividends reinvested/share: | $31.53 | ||||
| Total return: | 56.55% | ||||
| Average annual return: | 4.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,652.83 | ||||
The above analysis shows the ten year investment result worked out as follows, with an annualized rate of return of 4.58%. This would have turned a $10K investment made 10 years ago into $15,652.83 today (as of 08/21/2024). On a total return basis, that’s a result of 56.55% (something to think about: how might BA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Boeing Co. paid investors a total of $31.53/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 8.22/share, we calculate that BA has a current yield of approximately 4.74%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8.22 against the original $127.46/share purchase price. This works out to a yield on cost of 3.72%.
Another great investment quote to think about:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell
