“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 Pioneer Natural Resources Co (NYSE: PXD)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 01/10/2011 |
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| End date: | 01/07/2021 | ||||
| Start price/share: | $87.86 | ||||
| End price/share: | $131.99 | ||||
| Starting shares: | 113.82 | ||||
| Ending shares: | 118.44 | ||||
| Dividends reinvested/share: | $4.28 | ||||
| Total return: | 56.33% | ||||
| Average annual return: | 4.57% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,634.04 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 4.57%. This would have turned a $10K investment made 10 years ago into $15,634.04 today (as of 01/07/2021). On a total return basis, that’s a result of 56.33% (something to think about: how might PXD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pioneer Natural Resources Co paid investors a total of $4.28/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 2.2/share, we calculate that PXD has a current yield of approximately 1.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.2 against the original $87.86/share purchase price. This works out to a yield on cost of 1.90%.
Here’s one more great investment quote before you go:
“If you can follow only one bit of data, follow the earnings.” — Peter Lynch
