“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 ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Ford Motor Co. (NYSE: F)? Today, we examine the outcome of a ten year investment into the stock back in 2013.
| Start date: | 05/30/2013 |
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| End date: | 05/26/2023 | ||||
| Start price/share: | $15.90 | ||||
| End price/share: | $12.09 | ||||
| Starting shares: | 628.93 | ||||
| Ending shares: | 1,002.91 | ||||
| Dividends reinvested/share: | $5.83 | ||||
| Total return: | 21.25% | ||||
| Average annual return: | 1.95% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,129.04 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 1.95%. This would have turned a $10K investment made 10 years ago into $12,129.04 today (as of 05/26/2023). On a total return basis, that’s a result of 21.25% (something to think about: how might F shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Ford Motor Co. paid investors a total of $5.83/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 .6/share, we calculate that F has a current yield of approximately 4.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .6 against the original $15.90/share purchase price. This works out to a yield on cost of 31.19%.
More investment wisdom to ponder:
“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher
