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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 Exxon Mobil Corp (NYSE: XOM)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 10/30/2018


End date: 10/27/2023
Start price/share: $78.78
End price/share: $105.55
Starting shares: 126.94
Ending shares: 164.18
Dividends reinvested/share: $17.50
Total return: 73.29%
Average annual return: 11.64%
Starting investment: $10,000.00
Ending investment: $17,331.54

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 11.64%. This would have turned a $10K investment made 5 years ago into $17,331.54 today (as of 10/27/2023). On a total return basis, that’s a result of 73.29% (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 $17.50/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 3.8/share, we calculate that XOM has a current yield of approximately 3.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.8 against the original $78.78/share purchase price. This works out to a yield on cost of 4.57%.

Here’s one more great investment quote before you go:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch