“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Hess Corp (NYSE: HES)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 01/28/2002 |
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| End date: | 01/27/2022 | ||||
| Start price/share: | $19.87 | ||||
| End price/share: | $89.68 | ||||
| Starting shares: | 503.27 | ||||
| Ending shares: | 656.54 | ||||
| Dividends reinvested/share: | $13.10 | ||||
| Total return: | 488.79% | ||||
| Average annual return: | 9.26% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $58,836.31 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 9.26%. This would have turned a $10K investment made 20 years ago into $58,836.31 today (as of 01/27/2022). On a total return basis, that’s a result of 488.79% (something to think about: how might HES shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Hess Corp paid investors a total of $13.10/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/share, we calculate that HES has a current yield of approximately 1.12%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $19.87/share purchase price. This works out to a yield on cost of 5.64%.
One more piece of investment wisdom to leave you with:
“Those who do not remember the past are condemned to repeat it.” — George Santayana
