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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 National Oilwell Varco Inc (NYSE: NOV)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 02/17/2015


End date: 02/13/2020
Start price/share: $55.13
End price/share: $23.34
Starting shares: 181.39
Ending shares: 196.72
Dividends reinvested/share: $3.05
Total return: -54.09%
Average annual return: -14.44%
Starting investment: $10,000.00
Ending investment: $4,591.03

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -14.44%. This would have turned a $10K investment made 5 years ago into $4,591.03 today (as of 02/13/2020). On a total return basis, that’s a result of -54.09% (something to think about: how might NOV shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that National Oilwell Varco Inc paid investors a total of $3.05/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 .2/share, we calculate that NOV has a current yield of approximately 0.86%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .2 against the original $55.13/share purchase price. This works out to a yield on cost of 1.56%.

More investment wisdom to ponder:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra