“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 AMETEK Inc (NYSE: AME)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 11/06/2018 |
|
|||
| End date: | 11/03/2023 | ||||
| Start price/share: | $74.64 | ||||
| End price/share: | $143.70 | ||||
| Starting shares: | 133.98 | ||||
| Ending shares: | 138.67 | ||||
| Dividends reinvested/share: | $3.85 | ||||
| Total return: | 99.26% | ||||
| Average annual return: | 14.81% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $19,925.33 | ||||
The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 14.81%. This would have turned a $10K investment made 5 years ago into $19,925.33 today (as of 11/03/2023). On a total return basis, that’s a result of 99.26% (something to think about: how might AME shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AMETEK Inc paid investors a total of $3.85/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/share, we calculate that AME has a current yield of approximately 0.70%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $74.64/share purchase price. This works out to a yield on cost of 0.94%.
Here’s one more great investment quote before you go:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett
