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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 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 APA Corp (NASD: APA)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.

Start date: 06/25/2001


End date: 06/24/2021
Start price/share: $22.47
End price/share: $22.26
Starting shares: 445.04
Ending shares: 561.93
Dividends reinvested/share: $12.36
Total return: 25.08%
Average annual return: 1.12%
Starting investment: $10,000.00
Ending investment: $12,496.67

The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 1.12%. This would have turned a $10K investment made 20 years ago into $12,496.67 today (as of 06/24/2021). On a total return basis, that’s a result of 25.08% (something to think about: how might APA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that APA Corp paid investors a total of $12.36/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 .1/share, we calculate that APA has a current yield of approximately 0.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .1 against the original $22.47/share purchase price. This works out to a yield on cost of 2.00%.

Another great investment quote to think about:
“The greater the passive income you can build, the freer you will become.” — Todd Fleming