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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Air Products & Chemicals Inc (NYSE: APD), by taking a look at the investment outcome over a five year holding period.

Start date: 05/19/2014


End date: 05/16/2019
Start price/share: $109.37
End price/share: $209.43
Starting shares: 91.43
Ending shares: 103.49
Dividends reinvested/share: $17.81
Total return: 116.75%
Average annual return: 16.75%
Starting investment: $10,000.00
Ending investment: $21,672.84

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 16.75%. This would have turned a $10K investment made 5 years ago into $21,672.84 today (as of 05/16/2019). On a total return basis, that’s a result of 116.75% (something to think about: how might APD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Air Products & Chemicals Inc paid investors a total of $17.81/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 4.64/share, we calculate that APD has a current yield of approximately 2.22%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.64 against the original $109.37/share purchase price. This works out to a yield on cost of 2.03%.

Another great investment quote to think about:
“Money is better than poverty, if only for financial reasons.” — Woody Allen