Exxon Mobil (XOM), a consistent dividend payer and reliable blue chip, offers a high benchmark for any investment to aim for. In recent years, they set an even higher standard, benefitting from dramatic recent oil price increases and holding its price better than most of its Dow counterparts during the 2008 cross-market downturn.
So, when we considered which single investment might make a good comparison for our own performance over the past five years, XOM seemed like a worthy choice. After all, just like a “dividend aristocrat” like XOM, we want to be known for both delivering income and protecting invested capital.
So, what was the result? Well, of course, the headline already gave away the good news: a 2005 investment in one of our mortgage pools held through June 1, 2009 would be worth just a bit more than a similar investment in XOM held for the same period.
What does that mean in real dollars? Consider a $100,000 investment in XOM beginning January, 2005.
Starting price: $50.09
Starting shares: 1996.41
June, 2009 price: $71.06
Dividends 2005 $ 1.14
Dividends 2006 $ 1.28
Dividends 2007 $ 1.37
Dividends 2008 $ 1.55
Ending shares (dividends reinvested) — 2166.75
June 1, 2009 XOM portfolio value (dividends reinvested) — $153,969
Now consider a similar investment in one of Sterling Pacific’s mortgage pools. For the sake of this (conservative) analysis we will assume a return of 10% over the entire period (in fact, our pools averaged between 10.6% and 11.5% over the period). Yields earned on the $100,000 initial investment are compounded monthly. Assuming reinvestment in the pool, portfolio value would have grown over the period to over $155,000, as follows:
Portfolio value – 2005 $110,471.31
Portfolio value – 2006 $122,039.10
Portfolio value – 2007 $134,818.18
Portfolio value – 2008 $148,935.41
Portfolio value – 2009 (6/1/09) — $155,245.34
Of course we’re delighted to have outperformed an admired blue chip during what turned out to be a period of both extremely strong positive performance as well as extreme volatility. But, perhaps more important, we also helped our investors avoid much of the pain of the stock market’s instability during that period — whether they chose to invest a majority of their portfolio in the pool or just a portion to attain more diversification.