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

Start date: 11/13/2014
$10,000

11/13/2014
$11,475

11/12/2019
End date: 11/12/2019
Start price/share: $61.88
End price/share: $65.31
Starting shares: 161.60
Ending shares: 175.74
Dividends reinvested/share: $6.38
Total return: 14.77%
Average annual return: 2.79%
Starting investment: $10,000.00
Ending investment: $11,475.04

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 2.79%. This would have turned a $10K investment made 5 years ago into $11,475.04 today (as of 11/12/2019). On a total return basis, that’s a result of 14.77% (something to think about: how might ALB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Albemarle Corp. paid investors a total of $6.38/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 1.47/share, we calculate that ALB has a current yield of approximately 2.25%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.47 against the original $61.88/share purchase price. This works out to a yield on cost of 3.64%.

Here’s one more great investment quote before you go:
“Money is better than poverty, if only for financial reasons.” — Woody Allen