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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 ConocoPhillips (NYSE: COP)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 05/06/2015
$10,000

05/06/2015
$6,951

05/05/2020
End date: 05/05/2020
Start price/share: $67.23
End price/share: $40.92
Starting shares: 148.74
Ending shares: 169.91
Dividends reinvested/share: $7.18
Total return: -30.47%
Average annual return: -7.01%
Starting investment: $10,000.00
Ending investment: $6,951.76

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -7.01%. This would have turned a $10K investment made 5 years ago into $6,951.76 today (as of 05/05/2020). On a total return basis, that’s a result of -30.47% (something to think about: how might COP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that ConocoPhillips paid investors a total of $7.18/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 1.68/share, we calculate that COP has a current yield of approximately 4.11%. 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 $67.23/share purchase price. This works out to a yield on cost of 6.11%.

One more investment quote to leave you with:
“Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” — Benjamin Graham