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“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 Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a decade-long investment into the stock back in 2010.

Start date: 09/08/2010
$10,000

09/08/2010
$1,969

09/04/2020
End date: 09/04/2020
Start price/share: $63.07
End price/share: $10.55
Starting shares: 158.55
Ending shares: 186.72
Dividends reinvested/share: $6.32
Total return: -80.30%
Average annual return: -15.00%
Starting investment: $10,000.00
Ending investment: $1,969.62

The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -15.00%. This would have turned a $10K investment made 10 years ago into $1,969.62 today (as of 09/04/2020). On a total return basis, that’s a result of -80.30% (something to think about: how might DVN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Devon Energy Corp. paid investors a total of $6.32/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 .44/share, we calculate that DVN has a current yield of approximately 4.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .44 against the original $63.07/share purchase price. This works out to a yield on cost of 6.61%.

More investment wisdom to ponder:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John