“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 National Oilwell Varco Inc (NYSE: NOV)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 05/17/2010 |
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| End date: | 05/14/2020 | ||||
| Start price/share: | $35.31 | ||||
| End price/share: | $11.67 | ||||
| Starting shares: | 283.21 | ||||
| Ending shares: | 326.03 | ||||
| Dividends reinvested/share: | $6.66 | ||||
| Total return: | -61.95% | ||||
| Average annual return: | -9.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $3,805.22 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -9.21%. This would have turned a $10K investment made 10 years ago into $3,805.22 today (as of 05/14/2020). On a total return basis, that’s a result of -61.95% (something to think about: how might NOV shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that National Oilwell Varco Inc paid investors a total of $6.66/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 .2/share, we calculate that NOV has a current yield of approximately 1.71%. 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 $35.31/share purchase price. This works out to a yield on cost of 4.84%.
Here’s one more great investment quote before you go:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett
