“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 BorgWarner Inc (NYSE: BWA)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 12/09/2014 |
|
|||
| End date: | 12/06/2024 | ||||
| Start price/share: | $49.27 | ||||
| End price/share: | $33.80 | ||||
| Starting shares: | 202.96 | ||||
| Ending shares: | 235.61 | ||||
| Dividends reinvested/share: | $5.40 | ||||
| Total return: | -20.36% | ||||
| Average annual return: | -2.25% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,964.67 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -2.25%. This would have turned a $10K investment made 10 years ago into $7,964.67 today (as of 12/06/2024). On a total return basis, that’s a result of -20.36% (something to think about: how might BWA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that BorgWarner Inc paid investors a total of $5.40/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 .44/share, we calculate that BWA has a current yield of approximately 1.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .44 against the original $49.27/share purchase price. This works out to a yield on cost of 2.64%.
One more piece of investment wisdom to leave you with:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain
