“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 |
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| 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
