“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 DuPont (NYSE: DD)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 05/04/2017 |
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| End date: | 05/03/2022 | ||||
| Start price/share: | $129.99 | ||||
| End price/share: | $66.38 | ||||
| Starting shares: | 76.93 | ||||
| Ending shares: | 85.45 | ||||
| Dividends reinvested/share: | $10.40 | ||||
| Total return: | -43.28% | ||||
| Average annual return: | -10.72% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $5,672.45 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -10.72%. This would have turned a $10K investment made 5 years ago into $5,672.45 today (as of 05/03/2022). On a total return basis, that’s a result of -43.28% (something to think about: how might DD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DuPont paid investors a total of $10.40/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 1.32/share, we calculate that DD has a current yield of approximately 1.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.32 against the original $129.99/share purchase price. This works out to a yield on cost of 1.53%.
More investment wisdom to ponder:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John
