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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Exxon Mobil Corp (NYSE: XOM) back in 2013. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 02/07/2013


End date: 02/06/2023
Start price/share: $88.25
End price/share: $111.73
Starting shares: 113.31
Ending shares: 173.21
Dividends reinvested/share: $31.26
Total return: 93.53%
Average annual return: 6.82%
Starting investment: $10,000.00
Ending investment: $19,346.58

As shown above, the ten year investment result worked out well, with an annualized rate of return of 6.82%. This would have turned a $10K investment made 10 years ago into $19,346.58 today (as of 02/06/2023). On a total return basis, that’s a result of 93.53% (something to think about: how might XOM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Exxon Mobil Corp paid investors a total of $31.26/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 3.64/share, we calculate that XOM has a current yield of approximately 3.26%. 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 $88.25/share purchase price. This works out to a yield on cost of 3.69%.

One more piece of investment wisdom to leave you with:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch