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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Exxon Mobil Corp (NYSE: XOM)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 10/05/2016


End date: 10/04/2021
Start price/share: $87.00
End price/share: $61.72
Starting shares: 114.94
Ending shares: 148.62
Dividends reinvested/share: $16.56
Total return: -8.27%
Average annual return: -1.71%
Starting investment: $10,000.00
Ending investment: $9,173.75

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -1.71%. This would have turned a $10K investment made 5 years ago into $9,173.75 today (as of 10/04/2021). On a total return basis, that’s a result of -8.27% (something to think about: how might XOM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Exxon Mobil Corp paid investors a total of $16.56/share in dividends over the 5 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 3.48/share, we calculate that XOM has a current yield of approximately 5.64%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.48 against the original $87.00/share purchase price. This works out to a yield on cost of 6.48%.

Here’s one more great investment quote before you go:
“If you can follow only one bit of data, follow the earnings.” — Peter Lynch