“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into ConocoPhillips (NYSE: COP)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 10/11/1999 |
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| End date: | 10/09/2019 | ||||
| Start price/share: | $16.31 | ||||
| End price/share: | $54.94 | ||||
| Starting shares: | 613.12 | ||||
| Ending shares: | 1,125.17 | ||||
| Dividends reinvested/share: | $27.92 | ||||
| Total return: | 518.17% | ||||
| Average annual return: | 9.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $61,799.74 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 9.53%. This would have turned a $10K investment made 20 years ago into $61,799.74 today (as of 10/09/2019). On a total return basis, that’s a result of 518.17% (something to think about: how might COP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that ConocoPhillips paid investors a total of $27.92/share in dividends over the 20 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 1.68/share, we calculate that COP has a current yield of approximately 3.06%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $16.31/share purchase price. This works out to a yield on cost of 18.76%.
One more piece of investment wisdom to leave you with:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
