“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Devon Energy Corp. (NYSE: DVN)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 06/06/2019 |
|
|||
| End date: | 06/05/2024 | ||||
| Start price/share: | $25.63 | ||||
| End price/share: | $46.62 | ||||
| Starting shares: | 390.17 | ||||
| Ending shares: | 516.20 | ||||
| Dividends reinvested/share: | $11.40 | ||||
| Total return: | 140.65% | ||||
| Average annual return: | 19.19% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,066.23 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 19.19%. This would have turned a $10K investment made 5 years ago into $24,066.23 today (as of 06/05/2024). On a total return basis, that’s a result of 140.65% (something to think about: how might DVN shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Devon Energy Corp. paid investors a total of $11.40/share in dividends over the 5 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 .88/share, we calculate that DVN has a current yield of approximately 1.89%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .88 against the original $25.63/share purchase price. This works out to a yield on cost of 7.37%.
More investment wisdom to ponder:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
