“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 Marathon Oil Corp. (NYSE: MRO)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 02/07/2012 |
|
|||
| End date: | 02/04/2022 | ||||
| Start price/share: | $33.16 | ||||
| End price/share: | $21.50 | ||||
| Starting shares: | 301.57 | ||||
| Ending shares: | 360.41 | ||||
| Dividends reinvested/share: | $3.94 | ||||
| Total return: | -22.51% | ||||
| Average annual return: | -2.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,747.39 | ||||
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -2.52%. This would have turned a $10K investment made 10 years ago into $7,747.39 today (as of 02/04/2022). On a total return basis, that’s a result of -22.51% (something to think about: how might MRO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Marathon Oil Corp. paid investors a total of $3.94/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 .28/share, we calculate that MRO has a current yield of approximately 1.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .28 against the original $33.16/share purchase price. This works out to a yield on cost of 3.92%.
More investment wisdom to ponder:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra
