Photo credit:

“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Exxon Mobil Corp (NYSE: XOM)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 06/11/2001


End date: 06/09/2021
Start price/share: $44.85
End price/share: $62.65
Starting shares: 222.97
Ending shares: 413.92
Dividends reinvested/share: $42.15
Total return: 159.32%
Average annual return: 4.88%
Starting investment: $10,000.00
Ending investment: $25,943.21

As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 4.88%. This would have turned a $10K investment made 20 years ago into $25,943.21 today (as of 06/09/2021). On a total return basis, that’s a result of 159.32% (something to think about: how might XOM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Exxon Mobil Corp paid investors a total of $42.15/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 3.48/share, we calculate that XOM has a current yield of approximately 5.55%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.48 against the original $44.85/share purchase price. This works out to a yield on cost of 12.37%.

Another great investment quote to think about:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes