“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 Cabot Oil & Gas Corp. (NYSE: COG)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 12/16/2015 |
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| End date: | 12/15/2020 | ||||
| Start price/share: | $15.39 | ||||
| End price/share: | $17.32 | ||||
| Starting shares: | 649.77 | ||||
| Ending shares: | 689.89 | ||||
| Dividends reinvested/share: | $1.25 | ||||
| Total return: | 19.49% | ||||
| Average annual return: | 3.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,947.04 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.62%. This would have turned a $10K investment made 5 years ago into $11,947.04 today (as of 12/15/2020). On a total return basis, that’s a result of 19.49% (something to think about: how might COG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Cabot Oil & Gas Corp. paid investors a total of $1.25/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 .4/share, we calculate that COG has a current yield of approximately 2.31%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $15.39/share purchase price. This works out to a yield on cost of 15.01%.
One more piece of investment wisdom to leave you with:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
