“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 FedEx Corp (NYSE: FDX)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 10/05/2018 |
|
|||
| End date: | 10/04/2023 | ||||
| Start price/share: | $236.06 | ||||
| End price/share: | $260.05 | ||||
| Starting shares: | 42.36 | ||||
| Ending shares: | 45.97 | ||||
| Dividends reinvested/share: | $16.62 | ||||
| Total return: | 19.55% | ||||
| Average annual return: | 3.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,957.41 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 3.64%. This would have turned a $10K investment made 5 years ago into $11,957.41 today (as of 10/04/2023). On a total return basis, that’s a result of 19.55% (something to think about: how might FDX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that FedEx Corp paid investors a total of $16.62/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 5.04/share, we calculate that FDX has a current yield of approximately 1.94%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.04 against the original $236.06/share purchase price. This works out to a yield on cost of 0.82%.
One more piece of investment wisdom to leave you with:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” — Warren Buffett
