“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 Skyworks Solutions Inc (NASD: SWKS)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 04/14/2015 |
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| End date: | 04/13/2020 | ||||
| Start price/share: | $95.64 | ||||
| End price/share: | $90.47 | ||||
| Starting shares: | 104.56 | ||||
| Ending shares: | 112.80 | ||||
| Dividends reinvested/share: | $6.41 | ||||
| Total return: | 2.05% | ||||
| Average annual return: | 0.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,206.80 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 0.41%. This would have turned a $10K investment made 5 years ago into $10,206.80 today (as of 04/13/2020). On a total return basis, that’s a result of 2.05% (something to think about: how might SWKS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Skyworks Solutions Inc paid investors a total of $6.41/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 1.76/share, we calculate that SWKS has a current yield of approximately 1.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.76 against the original $95.64/share purchase price. This works out to a yield on cost of 2.04%.
More investment wisdom to ponder:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger
