“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Walmart Inc (NYSE: WMT)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 12/14/2012 |
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| End date: | 12/13/2022 | ||||
| Start price/share: | $68.75 | ||||
| End price/share: | $147.49 | ||||
| Starting shares: | 145.45 | ||||
| Ending shares: | 181.58 | ||||
| Dividends reinvested/share: | $20.60 | ||||
| Total return: | 167.82% | ||||
| Average annual return: | 10.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,781.85 | ||||
As we can see, the decade-long investment result worked out quite well, with an annualized rate of return of 10.35%. This would have turned a $10K investment made 10 years ago into $26,781.85 today (as of 12/13/2022). On a total return basis, that’s a result of 167.82% (something to think about: how might WMT shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Walmart Inc paid investors a total of $20.60/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 2.24/share, we calculate that WMT has a current yield of approximately 1.52%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.24 against the original $68.75/share purchase price. This works out to a yield on cost of 2.21%.
One more investment quote to leave you with:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett
