“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 08/05/2002 |
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| End date: | 08/03/2022 | ||||
| Start price/share: | $18.92 | ||||
| End price/share: | $56.70 | ||||
| Starting shares: | 528.54 | ||||
| Ending shares: | 737.71 | ||||
| Dividends reinvested/share: | $14.20 | ||||
| Total return: | 318.28% | ||||
| Average annual return: | 7.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $41,797.42 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 7.41%. This would have turned a $10K investment made 20 years ago into $41,797.42 today (as of 08/03/2022). On a total return basis, that’s a result of 318.28% (something to think about: how might DVN shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Devon Energy Corp. paid investors a total of $14.20/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 5.08/share, we calculate that DVN has a current yield of approximately 8.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.08 against the original $18.92/share purchase price. This works out to a yield on cost of 47.36%.
More investment wisdom to ponder:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt
