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“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 APA Corp (NASD: APA)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 01/16/2018


End date: 01/12/2023
Start price/share: $46.27
End price/share: $45.35
Starting shares: 216.12
Ending shares: 238.25
Dividends reinvested/share: $3.09
Total return: 8.05%
Average annual return: 1.56%
Starting investment: $10,000.00
Ending investment: $10,803.34

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 1.56%. This would have turned a $10K investment made 5 years ago into $10,803.34 today (as of 01/12/2023). On a total return basis, that’s a result of 8.05% (something to think about: how might APA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that APA Corp paid investors a total of $3.09/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 1/share, we calculate that APA has a current yield of approximately 2.21%. 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 $46.27/share purchase price. This works out to a yield on cost of 4.78%.

One more piece of investment wisdom to leave you with:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett