“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 Occidental Petroleum Corp (NYSE: OXY)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 01/20/2011 |
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| End date: | 01/19/2021 | ||||
| Start price/share: | $92.36 | ||||
| End price/share: | $23.07 | ||||
| Starting shares: | 108.27 | ||||
| Ending shares: | 163.02 | ||||
| Dividends reinvested/share: | $25.18 | ||||
| Total return: | -62.39% | ||||
| Average annual return: | -9.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $3,761.50 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -9.31%. This would have turned a $10K investment made 10 years ago into $3,761.50 today (as of 01/19/2021). On a total return basis, that’s a result of -62.39% (something to think about: how might OXY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Occidental Petroleum Corp paid investors a total of $25.18/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 .04/share, we calculate that OXY has a current yield of approximately 0.17%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .04 against the original $92.36/share purchase price. This works out to a yield on cost of 0.18%.
One more piece of investment wisdom to leave you with:
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” — Warren Buffett
