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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— 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 APA Corp (NASD: APA)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.

Start date: 12/19/2002


End date: 12/16/2022
Start price/share: $27.14
End price/share: $43.79
Starting shares: 368.46
Ending shares: 468.35
Dividends reinvested/share: $12.77
Total return: 105.09%
Average annual return: 3.66%
Starting investment: $10,000.00
Ending investment: $20,526.25

As we can see, the twenty year investment result worked out as follows, with an annualized rate of return of 3.66%. This would have turned a $10K investment made 20 years ago into $20,526.25 today (as of 12/16/2022). On a total return basis, that’s a result of 105.09% (something to think about: how might APA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that APA Corp paid investors a total of $12.77/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 1/share, we calculate that APA has a current yield of approximately 2.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $27.14/share purchase price. This works out to a yield on cost of 8.40%.

One more investment quote to leave you with:
“An investment in knowledge pays the best interest.” — Benjamin Franklin