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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 Exxon Mobil Corp (NYSE: XOM)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 11/19/2014


End date: 11/18/2019
Start price/share: $95.61
End price/share: $68.52
Starting shares: 104.59
Ending shares: 126.98
Dividends reinvested/share: $15.58
Total return: -13.00%
Average annual return: -2.75%
Starting investment: $10,000.00
Ending investment: $8,698.57

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -2.75%. This would have turned a $10K investment made 5 years ago into $8,698.57 today (as of 11/18/2019). On a total return basis, that’s a result of -13.00% (something to think about: how might XOM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Exxon Mobil Corp paid investors a total of $15.58/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 3.48/share, we calculate that XOM has a current yield of approximately 5.08%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.48 against the original $95.61/share purchase price. This works out to a yield on cost of 5.31%.

More investment wisdom to ponder:
“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently.” — Jack Bogle