Photo credit: commons.wikimedia.org

“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
$10,000

04/06/2009
$11,696

04/03/2019
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