“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 2019.
| Start date: | 11/06/2019 |
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| End date: | 11/05/2024 | ||||
| Start price/share: | $59.49 | ||||
| End price/share: | $9.62 | ||||
| Starting shares: | 168.10 | ||||
| Ending shares: | 216.62 | ||||
| Dividends reinvested/share: | $8.79 | ||||
| Total return: | -79.16% | ||||
| Average annual return: | -26.91% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $2,084.09 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -26.91%. This would have turned a $10K investment made 5 years ago into $2,084.09 today (as of 11/05/2024). On a total return basis, that’s a result of -79.16% (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 $8.79/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/share, we calculate that WBA has a current yield of approximately 10.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $59.49/share purchase price. This works out to a yield on cost of 17.47%.
More investment wisdom to ponder:
“Every once in a while, the market does something so stupid it takes your breath away.” — Jim Cramer
