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“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 Marathon Oil Corp. (NYSE: MRO)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.

Start date: 09/23/2011
$10,000

09/23/2011
$6,523

09/22/2021
End date: 09/22/2021
Start price/share: $22.06
End price/share: $12.02
Starting shares: 453.31
Ending shares: 542.75
Dividends reinvested/share: $4.03
Total return: -34.76%
Average annual return: -4.18%
Starting investment: $10,000.00
Ending investment: $6,523.19

The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -4.18%. This would have turned a $10K investment made 10 years ago into $6,523.19 today (as of 09/22/2021). On a total return basis, that’s a result of -34.76% (something to think about: how might MRO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Marathon Oil Corp. paid investors a total of $4.03/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/share, we calculate that MRO has a current yield of approximately 1.66%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .2 against the original $22.06/share purchase price. This works out to a yield on cost of 7.52%.

Here’s one more great investment quote before you go:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett