“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 Air Products & Chemicals Inc (NYSE: APD)? Today, we examine the outcome of a five year investment into the stock back in 2019.
| Start date: | 12/23/2019 |
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| End date: | 12/20/2024 | ||||
| Start price/share: | $235.14 | ||||
| End price/share: | $294.99 | ||||
| Starting shares: | 42.53 | ||||
| Ending shares: | 47.86 | ||||
| Dividends reinvested/share: | $31.31 | ||||
| Total return: | 41.17% | ||||
| Average annual return: | 7.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,114.85 | ||||
The above analysis shows the five year investment result worked out well, with an annualized rate of return of 7.14%. This would have turned a $10K investment made 5 years ago into $14,114.85 today (as of 12/20/2024). On a total return basis, that’s a result of 41.17% (something to think about: how might APD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Air Products & Chemicals Inc paid investors a total of $31.31/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 7.08/share, we calculate that APD has a current yield of approximately 2.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 7.08 against the original $235.14/share purchase price. This works out to a yield on cost of 1.02%.
One more investment quote to leave you with:
“If you’re prepared to invest in a company, then you ought to be able to explain why in simple language that a fifth grader could understand, and quickly enough so the fifth grader won’t get bored.” — Peter Lynch
