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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Pioneer Natural Resources Co (NYSE: PXD) back in 2012: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 09/21/2012


End date: 09/20/2022
Start price/share: $106.23
End price/share: $231.74
Starting shares: 94.14
Ending shares: 110.00
Dividends reinvested/share: $30.72
Total return: 154.91%
Average annual return: 9.81%
Starting investment: $10,000.00
Ending investment: $25,499.42

The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 9.81%. This would have turned a $10K investment made 10 years ago into $25,499.42 today (as of 09/20/2022). On a total return basis, that’s a result of 154.91% (something to think about: how might PXD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Pioneer Natural Resources Co paid investors a total of $30.72/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 4.4/share, we calculate that PXD has a current yield of approximately 1.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $106.23/share purchase price. This works out to a yield on cost of 1.79%.

Here’s one more great investment quote before you go:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham