“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 Mosaic Co (NYSE: MOS)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 12/27/2011 |
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| End date: | 12/23/2021 | ||||
| Start price/share: | $52.33 | ||||
| End price/share: | $39.18 | ||||
| Starting shares: | 191.09 | ||||
| Ending shares: | 227.66 | ||||
| Dividends reinvested/share: | $6.20 | ||||
| Total return: | -10.80% | ||||
| Average annual return: | -1.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,917.02 | ||||
As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -1.14%. This would have turned a $10K investment made 10 years ago into $8,917.02 today (as of 12/23/2021). On a total return basis, that’s a result of -10.80% (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 $6.20/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 .45/share, we calculate that MOS has a current yield of approximately 1.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .45 against the original $52.33/share purchase price. This works out to a yield on cost of 2.20%.
More investment wisdom to ponder:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham
