“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 Freeport-McMoran Copper & Gold (NYSE: FCX)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 03/09/2009 |
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| End date: | 03/07/2019 | ||||
| Start price/share: | $16.16 | ||||
| End price/share: | $12.31 | ||||
| Starting shares: | 618.81 | ||||
| Ending shares: | 791.56 | ||||
| Dividends reinvested/share: | $8.23 | ||||
| Total return: | -2.56% | ||||
| Average annual return: | -0.26% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,743.02 | ||||
The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -0.26%. This would have turned a $10K investment made 10 years ago into $9,743.02 today (as of 03/07/2019). On a total return basis, that’s a result of -2.56% (something to think about: how might FCX shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Freeport-McMoran Copper & Gold paid investors a total of $8.23/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 .2/share, we calculate that FCX has a current yield of approximately 1.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .2 against the original $16.16/share purchase price. This works out to a yield on cost of 10.02%.
One more investment quote to leave you with:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller
