“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 decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Archer Daniels Midland Co. (NYSE: ADM)? Today, we examine the outcome of a decade-long investment into the stock back in 2014.
| Start date: | 11/07/2014 |
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| End date: | 11/06/2024 | ||||
| Start price/share: | $50.55 | ||||
| End price/share: | $53.26 | ||||
| Starting shares: | 197.82 | ||||
| Ending shares: | 261.65 | ||||
| Dividends reinvested/share: | $14.40 | ||||
| Total return: | 39.36% | ||||
| Average annual return: | 3.37% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,932.34 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 3.37%. This would have turned a $10K investment made 10 years ago into $13,932.34 today (as of 11/06/2024). On a total return basis, that’s a result of 39.36% (something to think about: how might ADM shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price change, another component of ADM’s total return these past 10 years has been the payment by Archer Daniels Midland Co. of $14.40/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).
Based upon the most recent annualized dividend rate of 2/share, we calculate that ADM has a current yield of approximately 3.76%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $50.55/share purchase price. This works out to a yield on cost of 7.44%.
More investment wisdom to ponder:
“Value investing requires a great deal of hard work, unusually strict discipline, and a long-term investment horizon. Few are willing and able to devote sufficient time and effort to become value investors, and only a fraction of those have the proper mind-set to succeed.” — Seth Klarman
