“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 Concho Resources Inc (NYSE: CXO)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 11/20/2009 |
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| End date: | 11/19/2019 | ||||
| Start price/share: | $40.64 | ||||
| End price/share: | $70.92 | ||||
| Starting shares: | 246.06 | ||||
| Ending shares: | 247.47 | ||||
| Dividends reinvested/share: | $0.50 | ||||
| Total return: | 75.50% | ||||
| Average annual return: | 5.78% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,542.94 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 5.78%. This would have turned a $10K investment made 10 years ago into $17,542.94 today (as of 11/19/2019). On a total return basis, that’s a result of 75.50% (something to think about: how might CXO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Concho Resources Inc paid investors a total of $0.50/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 .5/share, we calculate that CXO has a current yield of approximately 0.70%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .5 against the original $40.64/share purchase price. This works out to a yield on cost of 1.72%.
One more piece of investment wisdom to leave you with:
“The most important thing about an investment philosophy is that you have one.” — David Booth
