“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 Occidental Petroleum Corp (NYSE: OXY)? Today, we examine the outcome of a ten year investment into the stock back in 2013.
| Start date: | 10/07/2013 |
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| End date: | 10/05/2023 | ||||
| Start price/share: | $91.28 | ||||
| End price/share: | $59.42 | ||||
| Starting shares: | 109.55 | ||||
| Ending shares: | 157.23 | ||||
| Dividends reinvested/share: | $20.61 | ||||
| Total return: | -6.57% | ||||
| Average annual return: | -0.68% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,340.44 | ||||
As we can see, the ten year investment result worked out poorly, with an annualized rate of return of -0.68%. This would have turned a $10K investment made 10 years ago into $9,340.44 today (as of 10/05/2023). On a total return basis, that’s a result of -6.57% (something to think about: how might OXY shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Occidental Petroleum Corp paid investors a total of $20.61/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 .72/share, we calculate that OXY has a current yield of approximately 1.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .72 against the original $91.28/share purchase price. This works out to a yield on cost of 1.33%.
Another great investment quote to think about:
“In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep money.” — Ray Dalio
