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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 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 FedEx Corp (NYSE: FDX)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 09/04/2014
$10,000

09/04/2014
$10,682

09/03/2019
End date: 09/03/2019
Start price/share: $152.04
End price/share: $155.37
Starting shares: 65.77
Ending shares: 68.74
Dividends reinvested/share: $8.45
Total return: 6.81%
Average annual return: 1.33%
Starting investment: $10,000.00
Ending investment: $10,682.93

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 1.33%. This would have turned a $10K investment made 5 years ago into $10,682.93 today (as of 09/03/2019). On a total return basis, that’s a result of 6.81% (something to think about: how might FDX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that FedEx Corp paid investors a total of $8.45/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 2.6/share, we calculate that FDX has a current yield of approximately 1.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.6 against the original $152.04/share purchase price. This works out to a yield on cost of 1.10%.

Here’s one more great investment quote before you go:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett