“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 Newmont Corp (NYSE: NEM)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 03/27/2017 |
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| End date: | 03/24/2022 | ||||
| Start price/share: | $33.91 | ||||
| End price/share: | $78.23 | ||||
| Starting shares: | 294.90 | ||||
| Ending shares: | 333.69 | ||||
| Dividends reinvested/share: | $5.99 | ||||
| Total return: | 161.05% | ||||
| Average annual return: | 21.18% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,103.43 | ||||
The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 21.18%. This would have turned a $10K investment made 5 years ago into $26,103.43 today (as of 03/24/2022). On a total return basis, that’s a result of 161.05% (something to think about: how might NEM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Newmont Corp paid investors a total of $5.99/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 2.2/share, we calculate that NEM has a current yield of approximately 2.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.2 against the original $33.91/share purchase price. This works out to a yield on cost of 8.29%.
Here’s one more great investment quote before you go:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
