“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Cimarex Energy Co (NYSE: XEC)? Today, we examine the outcome of a decade-long investment into the stock back in 2009.
| Start date: | 12/28/2009 |
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| End date: | 12/26/2019 | ||||
| Start price/share: | $53.88 | ||||
| End price/share: | $52.24 | ||||
| Starting shares: | 185.60 | ||||
| Ending shares: | 197.72 | ||||
| Dividends reinvested/share: | $5.18 | ||||
| Total return: | 3.29% | ||||
| Average annual return: | 0.32% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,324.65 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 0.32%. This would have turned a $10K investment made 10 years ago into $10,324.65 today (as of 12/26/2019). On a total return basis, that’s a result of 3.29% (something to think about: how might XEC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cimarex Energy Co paid investors a total of $5.18/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 .8/share, we calculate that XEC has a current yield of approximately 1.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .8 against the original $53.88/share purchase price. This works out to a yield on cost of 2.84%.
Here’s one more great investment quote before you go:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
