“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into ConocoPhillips (NYSE: COP)? Today, we examine the outcome of a two-decade investment into the stock back in 2001.
| Start date: | 10/29/2001 |
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| End date: | 10/26/2021 | ||||
| Start price/share: | $21.95 | ||||
| End price/share: | $77.03 | ||||
| Starting shares: | 455.58 | ||||
| Ending shares: | 852.30 | ||||
| Dividends reinvested/share: | $30.29 | ||||
| Total return: | 556.53% | ||||
| Average annual return: | 9.86% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $65,599.99 | ||||
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 9.86%. This would have turned a $10K investment made 20 years ago into $65,599.99 today (as of 10/26/2021). On a total return basis, that’s a result of 556.53% (something to think about: how might COP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that ConocoPhillips paid investors a total of $30.29/share in dividends over the 20 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 1.84/share, we calculate that COP has a current yield of approximately 2.39%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.84 against the original $21.95/share purchase price. This works out to a yield on cost of 10.89%.
Here’s one more great investment quote before you go:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt
