“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Freeport-McMoran Copper & Gold (NYSE: FCX)? Today, we examine the outcome of a two-decade investment into the stock back in 2000.
| Start date: | 05/18/2000 |
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| End date: | 05/15/2020 | ||||
| Start price/share: | $5.50 | ||||
| End price/share: | $8.48 | ||||
| Starting shares: | 1,818.18 | ||||
| Ending shares: | 2,941.04 | ||||
| Dividends reinvested/share: | $13.90 | ||||
| Total return: | 149.40% | ||||
| Average annual return: | 4.67% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $24,920.29 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 4.67%. This would have turned a $10K investment made 20 years ago into $24,920.29 today (as of 05/15/2020). On a total return basis, that’s a result of 149.40% (something to think about: how might FCX shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Freeport-McMoran Copper & Gold paid investors a total of $13.90/share in dividends over the 20 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/share, we calculate that FCX has a current yield of approximately 2.36%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .2 against the original $5.50/share purchase price. This works out to a yield on cost of 42.91%.
One more piece of investment wisdom to leave you with:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
