“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 CF Industries Holdings Inc (NYSE: CF)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 08/02/2011 |
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| End date: | 07/30/2021 | ||||
| Start price/share: | $30.58 | ||||
| End price/share: | $47.25 | ||||
| Starting shares: | 327.01 | ||||
| Ending shares: | 421.12 | ||||
| Dividends reinvested/share: | $9.72 | ||||
| Total return: | 98.98% | ||||
| Average annual return: | 7.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,893.25 | ||||
As we can see, the ten year investment result worked out well, with an annualized rate of return of 7.12%. This would have turned a $10K investment made 10 years ago into $19,893.25 today (as of 07/30/2021). On a total return basis, that’s a result of 98.98% (something to think about: how might CF shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividends are always an important investment factor to consider, and CF Industries Holdings Inc has paid $9.72/share in dividends to shareholders over the past 10 years we looked at above. Many an investor will only invest in stocks that pay dividends, so this component of total return is always an important consideration. Automated reinvestment of dividends into additional shares of stock can be a great way for an investor to compound their returns. The above calculations are done with the assuption that dividends received over time are reinvested (the calcuations use the closing price on ex-date).
Based upon the most recent annualized dividend rate of 1.2/share, we calculate that CF has a current yield of approximately 2.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $30.58/share purchase price. This works out to a yield on cost of 8.31%.
More investment wisdom to ponder:
“Generally, the greater the stigma or revulsion, the better the bargain.” — Seth Klarman
