“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 EOG Resources, Inc. (NYSE: EOG) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 01/29/2014 |
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| End date: | 01/26/2024 | ||||
| Start price/share: | $82.33 | ||||
| End price/share: | $115.54 | ||||
| Starting shares: | 121.46 | ||||
| Ending shares: | 158.05 | ||||
| Dividends reinvested/share: | $25.75 | ||||
| Total return: | 82.61% | ||||
| Average annual return: | 6.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,263.43 | ||||
The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 6.21%. This would have turned a $10K investment made 10 years ago into $18,263.43 today (as of 01/26/2024). On a total return basis, that’s a result of 82.61% (something to think about: how might EOG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that EOG Resources, Inc. paid investors a total of $25.75/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 3.64/share, we calculate that EOG has a current yield of approximately 3.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.64 against the original $82.33/share purchase price. This works out to a yield on cost of 3.83%.
One more piece of investment wisdom to leave you with:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham
