“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.
|Average annual return:||-4.18%|
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