“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten 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 ten year investment into the stock back in 2014.
| Start date: | 10/31/2014 |
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| End date: | 10/30/2024 | ||||
| Start price/share: | $77.20 | ||||
| End price/share: | $23.47 | ||||
| Starting shares: | 129.53 | ||||
| Ending shares: | 160.49 | ||||
| Dividends reinvested/share: | $8.09 | ||||
| Total return: | -62.33% | ||||
| Average annual return: | -9.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $3,765.66 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -9.30%. This would have turned a $10K investment made 10 years ago into $3,765.66 today (as of 10/30/2024). On a total return basis, that’s a result of -62.33% (something to think about: how might APA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that APA Corp paid investors a total of $8.09/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 1/share, we calculate that APA has a current yield of approximately 4.26%. 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 $77.20/share purchase price. This works out to a yield on cost of 5.52%.
Here’s one more great investment quote before you go:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch
