“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Chevron Corporation (NYSE: CVX)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 07/22/2011 |
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| End date: | 07/21/2021 | ||||
| Start price/share: | $108.97 | ||||
| End price/share: | $99.82 | ||||
| Starting shares: | 91.77 | ||||
| Ending shares: | 137.16 | ||||
| Dividends reinvested/share: | $43.13 | ||||
| Total return: | 36.92% | ||||
| Average annual return: | 3.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,691.49 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 3.19%. This would have turned a $10K investment made 10 years ago into $13,691.49 today (as of 07/21/2021). On a total return basis, that’s a result of 36.92% (something to think about: how might CVX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Chevron Corporation paid investors a total of $43.13/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 5.36/share, we calculate that CVX has a current yield of approximately 5.37%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.36 against the original $108.97/share purchase price. This works out to a yield on cost of 4.93%.
One more investment quote to leave you with:
“It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” — George Soros
