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 Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 04/29/2016


End date: 04/28/2021
Start price/share: $34.68
End price/share: $24.03
Starting shares: 288.35
Ending shares: 320.88
Dividends reinvested/share: $2.05
Total return: -22.89%
Average annual return: -5.07%
Starting investment: $10,000.00
Ending investment: $7,709.34

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -5.07%. This would have turned a $10K investment made 5 years ago into $7,709.34 today (as of 04/28/2021). On a total return basis, that’s a result of -22.89% (something to think about: how might DVN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Devon Energy Corp. paid investors a total of $2.05/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 .44/share, we calculate that DVN has a current yield of approximately 1.83%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .44 against the original $34.68/share purchase price. This works out to a yield on cost of 5.28%.

One more piece of investment wisdom to leave you with:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman