“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 Hess Corp (NYSE: HES)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 04/06/2009 |
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| End date: | 04/03/2019 | ||||
| Start price/share: | $57.80 | ||||
| End price/share: | $59.56 | ||||
| Starting shares: | 173.01 | ||||
| Ending shares: | 196.41 | ||||
| Dividends reinvested/share: | $7.45 | ||||
| Total return: | 16.98% | ||||
| Average annual return: | 1.58% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,696.70 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 1.58%. This would have turned a $10K investment made 10 years ago into $11,696.70 today (as of 04/03/2019). On a total return basis, that’s a result of 16.98% (something to think about: how might HES shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hess Corp paid investors a total of $7.45/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 1/share, we calculate that HES has a current yield of approximately 1.68%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $57.80/share purchase price. This works out to a yield on cost of 2.91%.
More investment wisdom to ponder:
“When you sell in desperation, you always sell cheap.” — Peter Lynch
