“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 Mosaic Co (NYSE: MOS)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 08/30/2010 |
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| End date: | 08/27/2020 | ||||
| Start price/share: | $57.25 | ||||
| End price/share: | $18.42 | ||||
| Starting shares: | 174.67 | ||||
| Ending shares: | 206.11 | ||||
| Dividends reinvested/share: | $6.08 | ||||
| Total return: | -62.04% | ||||
| Average annual return: | -9.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $3,796.85 | ||||
The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -9.23%. This would have turned a $10K investment made 10 years ago into $3,796.85 today (as of 08/27/2020). On a total return basis, that’s a result of -62.04% (something to think about: how might MOS shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Mosaic Co paid investors a total of $6.08/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 .2/share, we calculate that MOS has a current yield of approximately 1.09%. 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 $57.25/share purchase price. This works out to a yield on cost of 1.90%.
One more investment quote to leave you with:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch
