“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 decade-long 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 decade-long investment into the stock back in 2010.
| Start date: | 09/08/2010 |
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| End date: | 09/04/2020 | ||||
| Start price/share: | $35.94 | ||||
| End price/share: | $12.15 | ||||
| Starting shares: | 278.24 | ||||
| Ending shares: | 319.41 | ||||
| Dividends reinvested/share: | $6.57 | ||||
| Total return: | -61.19% | ||||
| Average annual return: | -9.03% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $3,882.35 | ||||
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -9.03%. This would have turned a $10K investment made 10 years ago into $3,882.35 today (as of 09/04/2020). On a total return basis, that’s a result of -61.19% (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 $6.57/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 1.65%. 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 $35.94/share purchase price. This works out to a yield on cost of 4.59%.
One more piece of investment wisdom to leave you with:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett
