“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Pioneer Natural Resources Co (NYSE: PXD)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 06/29/2011 |
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| End date: | 06/28/2021 | ||||
| Start price/share: | $88.87 | ||||
| End price/share: | $160.24 | ||||
| Starting shares: | 112.52 | ||||
| Ending shares: | 117.46 | ||||
| Dividends reinvested/share: | $4.80 | ||||
| Total return: | 88.21% | ||||
| Average annual return: | 6.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,813.17 | ||||
As shown above, the ten year investment result worked out well, with an annualized rate of return of 6.52%. This would have turned a $10K investment made 10 years ago into $18,813.17 today (as of 06/28/2021). On a total return basis, that’s a result of 88.21% (something to think about: how might PXD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pioneer Natural Resources Co paid investors a total of $4.80/share in dividends over the 10 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 2.24/share, we calculate that PXD has a current yield of approximately 1.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.24 against the original $88.87/share purchase price. This works out to a yield on cost of 1.58%.
More investment wisdom to ponder:
“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett
