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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Apache Corp (NYSE: APA)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 07/23/2014


End date: 07/22/2019
Start price/share: $103.48
End price/share: $23.86
Starting shares: 96.64
Ending shares: 107.87
Dividends reinvested/share: $5.00
Total return: -74.26%
Average annual return: -23.77%
Starting investment: $10,000.00
Ending investment: $2,574.12

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -23.77%. This would have turned a $10K investment made 5 years ago into $2,574.12 today (as of 07/22/2019). On a total return basis, that’s a result of -74.26% (something to think about: how might APA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Apache Corp paid investors a total of $5.00/share in dividends over the 5 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 APA has a current yield of approximately 4.19%. 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 $103.48/share purchase price. This works out to a yield on cost of 4.05%.

One more investment quote to leave you with:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham