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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: 06/29/2015


End date: 06/26/2020
Start price/share: $48.57
End price/share: $12.19
Starting shares: 205.89
Ending shares: 220.47
Dividends reinvested/share: $2.18
Total return: -73.12%
Average annual return: -23.12%
Starting investment: $10,000.00
Ending investment: $2,687.69

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -23.12%. This would have turned a $10K investment made 5 years ago into $2,687.69 today (as of 06/26/2020). On a total return basis, that’s a result of -73.12% (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 $2.18/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 .2/share, we calculate that NOV has a current yield of approximately 1.64%. 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 $48.57/share purchase price. This works out to a yield on cost of 3.38%.

One more investment quote to leave you with:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch