“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 decade-long 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 decade-long investment into the stock back in 2011.
| Start date: | 02/22/2011 |
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| End date: | 02/19/2021 | ||||
| Start price/share: | $15.23 | ||||
| End price/share: | $11.58 | ||||
| Starting shares: | 656.60 | ||||
| Ending shares: | 969.00 | ||||
| Dividends reinvested/share: | $4.68 | ||||
| Total return: | 12.21% | ||||
| Average annual return: | 1.16% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,222.46 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 1.16%. This would have turned a $10K investment made 10 years ago into $11,222.46 today (as of 02/19/2021). On a total return basis, that’s a result of 12.21% (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 $4.68/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 0.00%. 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 $15.23/share purchase price. This works out to a yield on cost of 0.00%.
Here’s one more great investment quote before you go:
“The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.” — Michael Milken
