“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Marathon Oil Corp. (NYSE: MRO)? Today, we examine the outcome of a ten year investment into the stock back in 2013.
| Start date: | 07/15/2013 |
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| End date: | 07/12/2023 | ||||
| Start price/share: | $36.57 | ||||
| End price/share: | $24.79 | ||||
| Starting shares: | 273.45 | ||||
| Ending shares: | 322.75 | ||||
| Dividends reinvested/share: | $3.44 | ||||
| Total return: | -19.99% | ||||
| Average annual return: | -2.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,997.81 | ||||
As we can see, the ten year investment result worked out poorly, with an annualized rate of return of -2.21%. This would have turned a $10K investment made 10 years ago into $7,997.81 today (as of 07/12/2023). On a total return basis, that’s a result of -19.99% (something to think about: how might MRO shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Marathon Oil Corp. paid investors a total of $3.44/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 .4/share, we calculate that MRO has a current yield of approximately 1.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .4 against the original $36.57/share purchase price. This works out to a yield on cost of 4.43%.
Another great investment quote to think about:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham
