“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 Pioneer Natural Resources Co (NYSE: PXD)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 12/16/2016 |
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| End date: | 12/15/2021 | ||||
| Start price/share: | $184.99 | ||||
| End price/share: | $174.16 | ||||
| Starting shares: | 54.06 | ||||
| Ending shares: | 58.13 | ||||
| Dividends reinvested/share: | $10.01 | ||||
| Total return: | 1.24% | ||||
| Average annual return: | 0.25% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,125.63 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 0.25%. This would have turned a $10K investment made 5 years ago into $10,125.63 today (as of 12/15/2021). On a total return basis, that’s a result of 1.24% (something to think about: how might PXD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pioneer Natural Resources Co paid investors a total of $10.01/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 2.48/share, we calculate that PXD has a current yield of approximately 1.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.48 against the original $184.99/share purchase price. This works out to a yield on cost of 0.77%.
Here’s one more great investment quote before you go:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham
