“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 “buyandhold” 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 exdate 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