“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Occidental Petroleum Corp (NYSE: OXY)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 09/08/2009 |
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| End date: | 09/04/2019 | ||||
| Start price/share: | $71.92 | ||||
| End price/share: | $43.58 | ||||
| Starting shares: | 139.04 | ||||
| Ending shares: | 194.20 | ||||
| Dividends reinvested/share: | $24.82 | ||||
| Total return: | -15.37% | ||||
| Average annual return: | -1.66% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,459.45 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -1.66%. This would have turned a $10K investment made 10 years ago into $8,459.45 today (as of 09/04/2019). On a total return basis, that’s a result of -15.37% (something to think about: how might OXY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Occidental Petroleum Corp paid investors a total of $24.82/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 3.16/share, we calculate that OXY has a current yield of approximately 7.25%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.16 against the original $71.92/share purchase price. This works out to a yield on cost of 10.08%.
Here’s one more great investment quote before you go:
“When everyone is going right, look left.” — Sam Zell
