“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 Halliburton Company (NYSE: HAL)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 10/25/2004 |
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| End date: | 10/24/2024 | ||||
| Start price/share: | $17.18 | ||||
| End price/share: | $27.85 | ||||
| Starting shares: | 582.07 | ||||
| Ending shares: | 778.78 | ||||
| Dividends reinvested/share: | $9.64 | ||||
| Total return: | 116.89% | ||||
| Average annual return: | 3.94% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $21,668.97 | ||||
As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 3.94%. This would have turned a $10K investment made 20 years ago into $21,668.97 today (as of 10/24/2024). On a total return basis, that’s a result of 116.89% (something to think about: how might HAL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Halliburton Company paid investors a total of $9.64/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 .68/share, we calculate that HAL has a current yield of approximately 2.44%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .68 against the original $17.18/share purchase price. This works out to a yield on cost of 14.20%.
One more investment quote to leave you with:
“Nearly every time I strayed from the herd, I’ve made a lot of money. Wandering away from the action is the way to find the new action.” — Jim Rogers
