“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 Chevron Corporation (NYSE: CVX)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 06/21/2004 |
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| End date: | 06/18/2024 | ||||
| Start price/share: | $46.65 | ||||
| End price/share: | $153.33 | ||||
| Starting shares: | 214.36 | ||||
| Ending shares: | 453.40 | ||||
| Dividends reinvested/share: | $77.14 | ||||
| Total return: | 595.20% | ||||
| Average annual return: | 10.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,548.23 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 10.18%. This would have turned a $10K investment made 20 years ago into $69,548.23 today (as of 06/18/2024). On a total return basis, that’s a result of 595.20% (something to think about: how might CVX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Chevron Corporation paid investors a total of $77.14/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 6.52/share, we calculate that CVX has a current yield of approximately 4.25%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6.52 against the original $46.65/share purchase price. This works out to a yield on cost of 9.11%.
One more piece of investment wisdom to leave you with:
“Based on my own personal experience, both as an investor in recent years and an expert witness in years past, rarely do more than three or four variables really count. Everything else is noise.” — Martin Whitman
