Photo credit:

“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


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