“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade 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 two-decade investment into the stock back in 2004.
| Start date: | 06/14/2004 |
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| End date: | 06/11/2024 | ||||
| Start price/share: | $43.85 | ||||
| End price/share: | $112.17 | ||||
| Starting shares: | 228.05 | ||||
| Ending shares: | 441.54 | ||||
| Dividends reinvested/share: | $50.15 | ||||
| Total return: | 395.27% | ||||
| Average annual return: | 8.33% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $49,563.88 | ||||
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 8.33%. This would have turned a $10K investment made 20 years ago into $49,563.88 today (as of 06/11/2024). On a total return basis, that’s a result of 395.27% (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 $50.15/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 3.39%. 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 $43.85/share purchase price. This works out to a yield on cost of 7.73%.
Another great investment quote to think about:
“People who invest make money for themselves; people who speculate make money for their brokers.” — Benjamin Graham
