“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 decade-long 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 decade-long investment into the stock back in 2012.
| Start date: | 01/25/2012 |
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| End date: | 01/24/2022 | ||||
| Start price/share: | $87.22 | ||||
| End price/share: | $72.79 | ||||
| Starting shares: | 114.65 | ||||
| Ending shares: | 172.93 | ||||
| Dividends reinvested/share: | $29.89 | ||||
| Total return: | 25.88% | ||||
| Average annual return: | 2.33% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,591.71 | ||||
As we can see, the decade-long investment result worked out as follows, with an annualized rate of return of 2.33%. This would have turned a $10K investment made 10 years ago into $12,591.71 today (as of 01/24/2022). On a total return basis, that’s a result of 25.88% (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 4.84%. 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 $87.22/share purchase price. This works out to a yield on cost of 5.55%.
Here’s one more great investment quote before you go:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham
