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“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 CF Industries Holdings Inc (NYSE: CF)? Today, we examine the outcome of a five year investment into the stock back in 2017.

Start date: 04/03/2017


End date: 03/31/2022
Start price/share: $28.42
End price/share: $103.06
Starting shares: 351.86
Ending shares: 408.37
Dividends reinvested/share: $6.00
Total return: 320.87%
Average annual return: 33.34%
Starting investment: $10,000.00
Ending investment: $42,084.05

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 33.34%. This would have turned a $10K investment made 5 years ago into $42,084.05 today (as of 03/31/2022). On a total return basis, that’s a result of 320.87% (something to think about: how might CF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Many investors out there refuse to own any stock that lacks a dividend; in the case of CF Industries Holdings Inc, investors have received $6.00/share in dividends these past 5 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use 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 1.16%. 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 $28.42/share purchase price. This works out to a yield on cost of 4.08%.

Another great investment quote to think about:
“The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate.” — Benjamin Graham