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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— 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 twenty year holding period for an investor who was considering Exxon Mobil Corp (NYSE: XOM) back in 2003, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 11/21/2003
$10,000

11/21/2003
  $56,926

11/20/2023
End date: 11/20/2023
Start price/share: $35.34
End price/share: $104.50
Starting shares: 282.97
Ending shares: 545.16
Dividends reinvested/share: $48.77
Total return: 469.69%
Average annual return: 9.08%
Starting investment: $10,000.00
Ending investment: $56,926.73

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 9.08%. This would have turned a $10K investment made 20 years ago into $56,926.73 today (as of 11/20/2023). On a total return basis, that’s a result of 469.69% (something to think about: how might XOM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Exxon Mobil Corp paid investors a total of $48.77/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 3.8/share, we calculate that XOM has a current yield of approximately 3.64%. 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 $35.34/share purchase price. This works out to a yield on cost of 10.30%.

Here’s one more great investment quote before you go:
“The idea that a bell rings to signal when to get into or out of the stock market is simply not credible. After nearly fifty years in this business, I don’t know anybody who has done it successfully and consistently.” — Jack Bogle