“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Newmont Corp (NYSE: NEM)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 01/16/2004 |
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| End date: | 01/12/2024 | ||||
| Start price/share: | $43.08 | ||||
| End price/share: | $37.64 | ||||
| Starting shares: | 232.13 | ||||
| Ending shares: | 331.38 | ||||
| Dividends reinvested/share: | $16.07 | ||||
| Total return: | 24.73% | ||||
| Average annual return: | 1.11% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,470.83 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 1.11%. This would have turned a $10K investment made 20 years ago into $12,470.83 today (as of 01/12/2024). On a total return basis, that’s a result of 24.73% (something to think about: how might NEM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Newmont Corp paid investors a total of $16.07/share in dividends over the 20 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 1.6/share, we calculate that NEM has a current yield of approximately 4.25%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $43.08/share purchase price. This works out to a yield on cost of 9.87%.
More investment wisdom to ponder:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham
