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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 International Flavors & Fragrances Inc. (NYSE: IFF)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 01/04/2018


End date: 01/03/2023
Start price/share: $153.76
End price/share: $105.64
Starting shares: 65.04
Ending shares: 73.49
Dividends reinvested/share: $15.16
Total return: -22.36%
Average annual return: -4.94%
Starting investment: $10,000.00
Ending investment: $7,762.28

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -4.94%. This would have turned a $10K investment made 5 years ago into $7,762.28 today (as of 01/03/2023). On a total return basis, that’s a result of -22.36% (something to think about: how might IFF shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that International Flavors & Fragrances Inc. paid investors a total of $15.16/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 3.24/share, we calculate that IFF has a current yield of approximately 3.07%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.24 against the original $153.76/share purchase price. This works out to a yield on cost of 2.00%.

One more investment quote to leave you with:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller