“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Exxon Mobil Corp (NYSE: XOM)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 01/17/2018 |
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| End date: | 01/13/2023 | ||||
| Start price/share: | $88.00 | ||||
| End price/share: | $113.15 | ||||
| Starting shares: | 113.64 | ||||
| Ending shares: | 147.82 | ||||
| Dividends reinvested/share: | $17.18 | ||||
| Total return: | 67.26% | ||||
| Average annual return: | 10.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,722.87 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 10.85%. This would have turned a $10K investment made 5 years ago into $16,722.87 today (as of 01/13/2023). On a total return basis, that’s a result of 67.26% (something to think about: how might XOM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Exxon Mobil Corp paid investors a total of $17.18/share in dividends over the 5 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 3.64/share, we calculate that XOM has a current yield of approximately 3.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.64 against the original $88.00/share purchase price. This works out to a yield on cost of 3.66%.
One more investment quote to leave you with:
“Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and mutual funds altogether.” — Peter Lynch
