“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 two-decade 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 two-decade investment into the stock back in 2004.
| Start date: | 03/22/2004 |
|
|||
| End date: | 03/21/2024 | ||||
| Start price/share: | $31.18 | ||||
| End price/share: | $54.44 | ||||
| Starting shares: | 320.72 | ||||
| Ending shares: | 476.37 | ||||
| Dividends reinvested/share: | $22.67 | ||||
| Total return: | 159.33% | ||||
| Average annual return: | 4.88% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,943.21 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 4.88%. This would have turned a $10K investment made 20 years ago into $25,943.21 today (as of 03/21/2024). On a total return basis, that’s a result of 159.33% (something to think about: how might SLB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Schlumberger Ltd paid investors a total of $22.67/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 1.1/share, we calculate that SLB has a current yield of approximately 2.02%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.1 against the original $31.18/share purchase price. This works out to a yield on cost of 6.48%.
One more piece of investment wisdom to leave you with:
“We ignore outlooks and forecasts… we’re lousy at it and we admit it … everyone else is lousy too, but most people won’t admit it.” — Martin Whitman
