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“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
$10,000

10/11/1999
$61,799

10/09/2019
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