“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 Schlumberger Ltd (NYSE: SLB)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 01/12/2018 |
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| End date: | 01/11/2023 | ||||
| Start price/share: | $77.97 | ||||
| End price/share: | $56.32 | ||||
| Starting shares: | 128.25 | ||||
| Ending shares: | 149.70 | ||||
| Dividends reinvested/share: | $6.02 | ||||
| Total return: | -15.69% | ||||
| Average annual return: | -3.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,433.53 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -3.35%. This would have turned a $10K investment made 5 years ago into $8,433.53 today (as of 01/11/2023). On a total return basis, that’s a result of -15.69% (something to think about: how might SLB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $6.02/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 .7/share, we calculate that SLB has a current yield of approximately 1.24%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .7 against the original $77.97/share purchase price. This works out to a yield on cost of 1.59%.
One more piece of investment wisdom to leave you with:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens
