“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 Ford Motor Co. (NYSE: F)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 11/06/2009 |
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| End date: | 11/05/2019 | ||||
| Start price/share: | $7.75 | ||||
| End price/share: | $9.02 | ||||
| Starting shares: | 1,290.32 | ||||
| Ending shares: | 1,872.54 | ||||
| Dividends reinvested/share: | $4.53 | ||||
| Total return: | 68.90% | ||||
| Average annual return: | 5.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,890.57 | ||||
The above analysis shows the ten year investment result worked out well, with an annualized rate of return of 5.38%. This would have turned a $10K investment made 10 years ago into $16,890.57 today (as of 11/05/2019). On a total return basis, that’s a result of 68.90% (something to think about: how might F shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Ford Motor Co. paid investors a total of $4.53/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 .6/share, we calculate that F has a current yield of approximately 6.65%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $7.75/share purchase price. This works out to a yield on cost of 85.81%.
One more piece of investment wisdom to leave you with:
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.” — Warren Buffett
