“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2020, investors considering an investment into shares of Freeport-McMoran Copper & Gold (NYSE: FCX) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
| Start date: | 02/24/2020 |
|
|||
| End date: | 02/21/2025 | ||||
| Start price/share: | $11.24 | ||||
| End price/share: | $36.98 | ||||
| Starting shares: | 889.68 | ||||
| Ending shares: | 939.78 | ||||
| Dividends reinvested/share: | $2.17 | ||||
| Total return: | 247.53% | ||||
| Average annual return: | 28.31% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,754.09 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 28.31%. This would have turned a $10K investment made 5 years ago into $34,754.09 today (as of 02/21/2025). On a total return basis, that’s a result of 247.53% (something to think about: how might FCX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Freeport-McMoran Copper & Gold paid investors a total of $2.17/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 .3/share, we calculate that FCX has a current yield of approximately 0.81%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .3 against the original $11.24/share purchase price. This works out to a yield on cost of 7.21%.
Another great investment quote to think about:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
