“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 TechnipFMC plc (NYSE: FTI)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 04/24/2014 |
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| End date: | 04/23/2019 | ||||
| Start price/share: | $57.17 | ||||
| End price/share: | $25.44 | ||||
| Starting shares: | 174.92 | ||||
| Ending shares: | 180.00 | ||||
| Dividends reinvested/share: | $0.78 | ||||
| Total return: | -54.21% | ||||
| Average annual return: | -14.46% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $4,579.80 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -14.46%. This would have turned a $10K investment made 5 years ago into $4,579.80 today (as of 04/23/2019). On a total return basis, that’s a result of -54.21% (something to think about: how might FTI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that TechnipFMC plc paid investors a total of $0.78/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 .52/share, we calculate that FTI has a current yield of approximately 2.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .52 against the original $57.17/share purchase price. This works out to a yield on cost of 3.57%.
Another great investment quote to think about:
“It’s not how much money you make, but how much money you keep.” — Robert Kiyosaki
