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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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Pioneer Natural Resources Co (NYSE: PXD)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.

Start date: 03/31/2003
$10,000

03/31/2003
  $102,407

03/30/2023
End date: 03/30/2023
Start price/share: $25.10
End price/share: $202.06
Starting shares: 398.41
Ending shares: 506.61
Dividends reinvested/share: $43.53
Total return: 923.65%
Average annual return: 12.33%
Starting investment: $10,000.00
Ending investment: $102,407.13

As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 12.33%. This would have turned a $10K investment made 20 years ago into $102,407.13 today (as of 03/30/2023). On a total return basis, that’s a result of 923.65% (something to think about: how might PXD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Pioneer Natural Resources Co paid investors a total of $43.53/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 4.4/share, we calculate that PXD has a current yield of approximately 2.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.4 against the original $25.10/share purchase price. This works out to a yield on cost of 8.69%.

One more investment quote to leave you with:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman