“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a ten year holding period for an investor who was considering Pioneer Natural Resources Co (NYSE: PXD) back in 2013, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 11/29/2013 |
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| End date: | 11/28/2023 | ||||
| Start price/share: | $177.75 | ||||
| End price/share: | $236.11 | ||||
| Starting shares: | 56.26 | ||||
| Ending shares: | 70.71 | ||||
| Dividends reinvested/share: | $47.07 | ||||
| Total return: | 66.96% | ||||
| Average annual return: | 5.26% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,699.16 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 5.26%. This would have turned a $10K investment made 10 years ago into $16,699.16 today (as of 11/28/2023). On a total return basis, that’s a result of 66.96% (something to think about: how might PXD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pioneer Natural Resources Co paid investors a total of $47.07/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 5/share, we calculate that PXD has a current yield of approximately 2.12%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5 against the original $177.75/share purchase price. This works out to a yield on cost of 1.19%.
More investment wisdom to ponder:
“The emotional burden of trading is substantial; on any given day, I could lose millions of dollars. If you personalize these losses, you can’t trade.” — Bruce Kovner
