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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 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 Apache Corp (NASD: APA)? Today, we examine the outcome of a ten year investment into the stock back in 2010.

Start date: 11/11/2010


End date: 11/10/2020
Start price/share: $110.71
End price/share: $9.99
Starting shares: 90.33
Ending shares: 106.63
Dividends reinvested/share: $8.31
Total return: -89.35%
Average annual return: -20.05%
Starting investment: $10,000.00
Ending investment: $1,065.74

The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -20.05%. This would have turned a $10K investment made 10 years ago into $1,065.74 today (as of 11/10/2020). On a total return basis, that’s a result of -89.35% (something to think about: how might APA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Apache Corp paid investors a total of $8.31/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 .1/share, we calculate that APA has a current yield of approximately 1.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .1 against the original $110.71/share purchase price. This works out to a yield on cost of 0.90%.

More investment wisdom to ponder:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller