“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty 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 twenty year investment into the stock back in 2005.
| Start date: | 06/20/2005 |
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| End date: | 06/17/2025 | ||||
| Start price/share: | $45.59 | ||||
| End price/share: | $11.39 | ||||
| Starting shares: | 219.35 | ||||
| Ending shares: | 377.48 | ||||
| Dividends reinvested/share: | $23.06 | ||||
| Total return: | -57.00% | ||||
| Average annual return: | -4.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $4,300.85 | ||||
As we can see, the twenty year investment result worked out poorly, with an annualized rate of return of -4.13%. This would have turned a $10K investment made 20 years ago into $4,300.85 today (as of 06/17/2025). On a total return basis, that’s a result of -57.00% (something to think about: how might WBA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walgreens Boots Alliance Inc paid investors a total of $23.06/share in dividends over the 20 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 8.78%. 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 $45.59/share purchase price. This works out to a yield on cost of 19.26%.
Another great investment quote to think about:
“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. You need to keep raw, irrational emotion under control.” — Charlie Munger
