“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 APA Corp (NASD: APA)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 09/11/2019 |
|
|||
| End date: | 09/10/2024 | ||||
| Start price/share: | $23.99 | ||||
| End price/share: | $23.85 | ||||
| Starting shares: | 416.84 | ||||
| Ending shares: | 459.72 | ||||
| Dividends reinvested/share: | $3.09 | ||||
| Total return: | 9.64% | ||||
| Average annual return: | 1.86% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,965.80 | ||||
The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 1.86%. This would have turned a $10K investment made 5 years ago into $10,965.80 today (as of 09/10/2024). On a total return basis, that’s a result of 9.64% (something to think about: how might APA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that APA Corp paid investors a total of $3.09/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 1/share, we calculate that APA has a current yield of approximately 4.19%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $23.99/share purchase price. This works out to a yield on cost of 17.47%.
Another great investment quote to think about:
“When you sell in desperation, you always sell cheap.” — Peter Lynch
