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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into NOV Inc (NYSE: NOV)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.

Start date: 02/05/2001


End date: 02/04/2021
Start price/share: $16.44
End price/share: $13.78
Starting shares: 608.27
Ending shares: 719.80
Dividends reinvested/share: $7.74
Total return: -0.81%
Average annual return: -0.04%
Starting investment: $10,000.00
Ending investment: $9,920.26

The above analysis shows the two-decade investment result worked out poorly, with an annualized rate of return of -0.04%. This would have turned a $10K investment made 20 years ago into $9,920.26 today (as of 02/04/2021). On a total return basis, that’s a result of -0.81% (something to think about: how might NOV shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that NOV Inc paid investors a total of $7.74/share in dividends over the 20 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/share, we calculate that NOV has a current yield of approximately 0.00%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .2 against the original $16.44/share purchase price. This works out to a yield on cost of 0.00%.

Another great investment quote to think about:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch