“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 ten 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 ten year investment into the stock back in 2011.
Start date: | 12/21/2011 |
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End date: | 12/20/2021 | ||||
Start price/share: | $83.12 | ||||
End price/share: | $59.16 | ||||
Starting shares: | 120.31 | ||||
Ending shares: | 181.46 | ||||
Dividends reinvested/share: | $29.89 | ||||
Total return: | 7.35% | ||||
Average annual return: | 0.71% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $10,733.54 |
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 0.71%. This would have turned a $10K investment made 10 years ago into $10,733.54 today (as of 12/20/2021). On a total return basis, that’s a result of 7.35% (something to think about: how might XOM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Exxon Mobil Corp paid investors a total of $29.89/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 3.52/share, we calculate that XOM has a current yield of approximately 5.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.52 against the original $83.12/share purchase price. This works out to a yield on cost of 7.16%.
One more investment quote to leave you with:
“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett