“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 Mosaic Co (NYSE: MOS)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 09/23/2015 |
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| End date: | 09/22/2020 | ||||
| Start price/share: | $31.98 | ||||
| End price/share: | $18.05 | ||||
| Starting shares: | 312.70 | ||||
| Ending shares: | 343.60 | ||||
| Dividends reinvested/share: | $2.40 | ||||
| Total return: | -37.98% | ||||
| Average annual return: | -9.11% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $6,201.07 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -9.11%. This would have turned a $10K investment made 5 years ago into $6,201.07 today (as of 09/22/2020). On a total return basis, that’s a result of -37.98% (something to think about: how might MOS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Mosaic Co paid investors a total of $2.40/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 MOS has a current yield of approximately 1.11%. 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 $31.98/share purchase price. This works out to a yield on cost of 3.47%.
Another great investment quote to think about:
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” — George Soros
