Photo credit:

“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 Freeport-McMoran Copper & Gold (NYSE: FCX)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 06/09/2015


End date: 06/08/2020
Start price/share: $20.02
End price/share: $11.25
Starting shares: 499.50
Ending shares: 522.22
Dividends reinvested/share: $0.61
Total return: -41.25%
Average annual return: -10.09%
Starting investment: $10,000.00
Ending investment: $5,873.72

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -10.09%. This would have turned a $10K investment made 5 years ago into $5,873.72 today (as of 06/08/2020). On a total return basis, that’s a result of -41.25% (something to think about: how might FCX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Freeport-McMoran Copper & Gold paid investors a total of $0.61/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/share, we calculate that FCX has a current yield of approximately 1.78%. 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 $20.02/share purchase price. This works out to a yield on cost of 8.89%.

One more investment quote to leave you with:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger