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“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 Archer Daniels Midland Co. (NYSE: ADM)? Today, we examine the outcome of a five year investment into the stock back in 2020.

Start date: 02/21/2020
$10,000

02/21/2020
  $12,173

02/20/2025
End date: 02/20/2025
Start price/share: $43.90
End price/share: $46.55
Starting shares: 227.79
Ending shares: 261.46
Dividends reinvested/share: $8.47
Total return: 21.71%
Average annual return: 4.01%
Starting investment: $10,000.00
Ending investment: $12,173.69

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 4.01%. This would have turned a $10K investment made 5 years ago into $12,173.69 today (as of 02/20/2025). On a total return basis, that’s a result of 21.71% (something to think about: how might ADM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Archer Daniels Midland Co. paid investors a total of $8.47/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 2.04/share, we calculate that ADM has a current yield of approximately 4.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.04 against the original $43.90/share purchase price. This works out to a yield on cost of 9.98%.

More investment wisdom to ponder:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain