“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 Occidental Petroleum Corp (NYSE: OXY)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 12/29/2016 |
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| End date: | 12/28/2021 | ||||
| Start price/share: | $71.60 | ||||
| End price/share: | $29.48 | ||||
| Starting shares: | 139.66 | ||||
| Ending shares: | 174.56 | ||||
| Dividends reinvested/share: | $10.16 | ||||
| Total return: | -48.54% | ||||
| Average annual return: | -12.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,146.70 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -12.44%. This would have turned a $10K investment made 5 years ago into $5,146.70 today (as of 12/28/2021). On a total return basis, that’s a result of -48.54% (something to think about: how might OXY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Occidental Petroleum Corp paid investors a total of $10.16/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 .04/share, we calculate that OXY has a current yield of approximately 0.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .04 against the original $71.60/share purchase price. This works out to a yield on cost of 0.20%.
Another great investment quote to think about:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
