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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering ConocoPhillips (NYSE: COP) back in 2000, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 08/04/2000


End date: 08/03/2020
Start price/share: $20.13
End price/share: $36.71
Starting shares: 496.77
Ending shares: 916.54
Dividends reinvested/share: $29.10
Total return: 236.46%
Average annual return: 6.25%
Starting investment: $10,000.00
Ending investment: $33,640.88

As shown above, the twenty year investment result worked out well, with an annualized rate of return of 6.25%. This would have turned a $10K investment made 20 years ago into $33,640.88 today (as of 08/03/2020). On a total return basis, that’s a result of 236.46% (something to think about: how might COP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that ConocoPhillips paid investors a total of $29.10/share in dividends over the 20 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 4.58%. 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 $20.13/share purchase price. This works out to a yield on cost of 22.75%.

More investment wisdom to ponder:
“The whole secret to winning big in the stock market is not to be right all the time, but to lose the least amount possible when you’re wrong.” — William O’Neil