“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: | 05/13/2009 |
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| End date: | 05/10/2019 | ||||
| Start price/share: | $59.91 | ||||
| End price/share: | $63.58 | ||||
| Starting shares: | 166.92 | ||||
| Ending shares: | 189.49 | ||||
| Dividends reinvested/share: | $7.45 | ||||
| Total return: | 20.48% | ||||
| Average annual return: | 1.88% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,046.68 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 1.88%. This would have turned a $10K investment made 10 years ago into $12,046.68 today (as of 05/10/2019). On a total return basis, that’s a result of 20.48% (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 1.57%. 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 $59.91/share purchase price. This works out to a yield on cost of 2.62%.
One more investment quote to leave you with:
“He who earns and does not invest will have to work for the rest of his life.” — Debasish Mridha
