“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 Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 10/10/2011 |
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| End date: | 10/07/2021 | ||||
| Start price/share: | $58.76 | ||||
| End price/share: | $38.40 | ||||
| Starting shares: | 170.18 | ||||
| Ending shares: | 210.38 | ||||
| Dividends reinvested/share: | $6.85 | ||||
| Total return: | -19.21% | ||||
| Average annual return: | -2.11% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,079.48 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -2.11%. This would have turned a $10K investment made 10 years ago into $8,079.48 today (as of 10/07/2021). On a total return basis, that’s a result of -19.21% (something to think about: how might DVN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Devon Energy Corp. paid investors a total of $6.85/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 .44/share, we calculate that DVN has a current yield of approximately 1.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .44 against the original $58.76/share purchase price. This works out to a yield on cost of 1.96%.
One more investment quote to leave you with:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett
