“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering Coterra Energy Inc (NYSE: CTRA) back in 2005, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 07/21/2005 |
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| End date: | 07/18/2025 | ||||
| Start price/share: | $4.69 | ||||
| End price/share: | $24.39 | ||||
| Starting shares: | 2,132.20 | ||||
| Ending shares: | 2,968.10 | ||||
| Dividends reinvested/share: | $7.75 | ||||
| Total return: | 623.92% | ||||
| Average annual return: | 10.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $72,379.72 | ||||
As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 10.40%. This would have turned a $10K investment made 20 years ago into $72,379.72 today (as of 07/18/2025). On a total return basis, that’s a result of 623.92% (something to think about: how might CTRA shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Coterra Energy Inc paid investors a total of $7.75/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 .88/share, we calculate that CTRA has a current yield of approximately 3.61%. 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 $4.69/share purchase price. This works out to a yield on cost of 76.97%.
One more piece of investment wisdom to leave you with:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
