“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long 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 decade-long investment into the stock back in 2012.
| Start date: | 12/10/2012 |
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| End date: | 12/07/2022 | ||||
| Start price/share: | $52.32 | ||||
| End price/share: | $64.25 | ||||
| Starting shares: | 191.13 | ||||
| Ending shares: | 251.82 | ||||
| Dividends reinvested/share: | $10.74 | ||||
| Total return: | 61.79% | ||||
| Average annual return: | 4.93% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,178.55 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 4.93%. This would have turned a $10K investment made 10 years ago into $16,178.55 today (as of 12/07/2022). On a total return basis, that’s a result of 61.79% (something to think about: how might DVN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Devon Energy Corp. paid investors a total of $10.74/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 5.4/share, we calculate that DVN has a current yield of approximately 8.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.4 against the original $52.32/share purchase price. This works out to a yield on cost of 16.06%.
One more piece of investment wisdom to leave you with:
“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett
