“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 FMC Corp. (NYSE: FMC)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 06/24/2019 |
|
|||
| End date: | 06/21/2024 | ||||
| Start price/share: | $81.81 | ||||
| End price/share: | $56.39 | ||||
| Starting shares: | 122.23 | ||||
| Ending shares: | 135.98 | ||||
| Dividends reinvested/share: | $10.08 | ||||
| Total return: | -23.32% | ||||
| Average annual return: | -5.17% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $7,669.94 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -5.17%. This would have turned a $10K investment made 5 years ago into $7,669.94 today (as of 06/21/2024). On a total return basis, that’s a result of -23.32% (something to think about: how might FMC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that FMC Corp. paid investors a total of $10.08/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 2.32/share, we calculate that FMC has a current yield of approximately 4.11%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.32 against the original $81.81/share purchase price. This works out to a yield on cost of 5.02%.
More investment wisdom to ponder:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens
