“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 Molson Coors Beverage Co (NYSE: TAP)? Today, we examine the outcome of a five year investment into the stock back in 2016.
| Start date: | 07/11/2016 |
|
|||
| End date: | 07/08/2021 | ||||
| Start price/share: | $101.62 | ||||
| End price/share: | $52.73 | ||||
| Starting shares: | 98.41 | ||||
| Ending shares: | 108.63 | ||||
| Dividends reinvested/share: | $6.63 | ||||
| Total return: | -42.72% | ||||
| Average annual return: | -10.56% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,726.97 | ||||
As we can see, the five year investment result worked out poorly, with an annualized rate of return of -10.56%. This would have turned a $10K investment made 5 years ago into $5,726.97 today (as of 07/08/2021). On a total return basis, that’s a result of -42.72% (something to think about: how might TAP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Molson Coors Beverage Co paid investors a total of $6.63/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 2.28/share, we calculate that TAP has a current yield of approximately 4.32%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.28 against the original $101.62/share purchase price. This works out to a yield on cost of 4.25%.
One more investment quote to leave you with:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham
