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“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 Phillips 66 (NYSE: PSX)? Today, we examine the outcome of a five year investment into the stock back in 2017.

Start date: 07/17/2017


End date: 07/14/2022
Start price/share: $81.81
End price/share: $78.55
Starting shares: 122.23
Ending shares: 149.18
Dividends reinvested/share: $17.11
Total return: 17.18%
Average annual return: 3.22%
Starting investment: $10,000.00
Ending investment: $11,715.04

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 3.22%. This would have turned a $10K investment made 5 years ago into $11,715.04 today (as of 07/14/2022). On a total return basis, that’s a result of 17.18% (something to think about: how might PSX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Phillips 66 paid investors a total of $17.11/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 3.88/share, we calculate that PSX has a current yield of approximately 4.94%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.88 against the original $81.81/share purchase price. This works out to a yield on cost of 6.04%.

More investment wisdom to ponder:
“You make most of your money in a bear market, you just don’t realize it at the time.” — Shelby Davis