“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This well-known observation from Warren Buffett speaks directly to the importance of matching one’s investment decisions with an appropriate time horizon: can we reasonably envision holding a stock for many years, and potentially through a full market cycle, without being forced into short-term trading decisions?
For investors who identify as “buy-and-hold” participants in the equity market, what ultimately matters is not the inevitable short-term price volatility, but rather the company’s ability to compound value for shareholders over the long haul. Looking back five years to 2021, investors considering an allocation to CF Industries Holdings Inc (NYSE: CF) may have been asking exactly that question and weighing the potential outcome over a full five-year holding period. Below, we examine how such an investment would have performed.
| Start date: | 04/14/2021 |
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| End date: | 04/13/2026 | ||||
| Start price/share: | $47.22 | ||||
| End price/share: | $121.68 | ||||
| Starting shares: | 211.77 | ||||
| Ending shares: | 235.57 | ||||
| Dividends reinvested/share: | $8.50 | ||||
| Total return: | 186.64% | ||||
| Average annual return: | 23.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $28,660.22 | ||||
As the figures above illustrate, the five-year investment outcome was exceptionally strong, with an annualized rate of return of 23.44%. That compound growth rate would have turned a hypothetical $10,000 investment made on 04/14/2021 into $28,660.22 by 04/13/2026. On a total return basis, including both price appreciation and dividends, that equates to 186.64%. For long-term investors, this raises an obvious follow-up question: how might CF shares perform over the next five years, and what assumptions about earnings power and capital allocation would be required to repeat such a performance?
Importantly, CF Industries Holdings Inc is not simply a price-appreciation story. Over this period the company paid investors a total of $8.50 per share in dividends, representing a meaningful second component of total return beyond the change in the share price alone. CF Industries operates as a leading producer of nitrogen-based fertilizers, including ammonia, urea, and UAN solutions, products that are critical inputs for global agricultural productivity. The company’s cash flow profile and capital-intensive asset base have historically supported a shareholder-return framework that includes regular dividends and, at various points, share repurchase activity.
Much like watering a tree, reinvesting dividends can help an investment grow in a way that is not immediately obvious from the headline yield. In the above calculations, dividends are assumed to be fully reinvested back into CF shares via a dividend reinvestment plan (DRIP), with the closing price on the ex-dividend date used for the reinvestment price of each distribution. This reinvestment increased the share count from 211.77 to 235.57 over the period, magnifying the benefit of subsequent price gains and future dividends received.
Based upon the most recent annualized dividend rate of $2.00 per share, we calculate that CF has a current dividend yield of approximately 1.64%, using the $121.68 share price shown in the table. While that headline yield may appear modest relative to high-yield income securities, another useful lens is “yield on cost” — in other words, expressing the current annualized dividend of $2.00 against the original $47.22 per-share purchase price. On that basis, an investor’s yield on cost would now be approximately 4.24%, reflecting the impact of both dividend growth and share price appreciation over time.
From a fundamental perspective, CF’s share performance over this period was supported by favorable conditions in the global fertilizer industry. Tight nitrogen supply, elevated natural gas prices in certain producing regions, and robust demand tied to crop prices contributed to strong realized selling prices and margin expansion for nitrogen producers. CF’s relatively advantaged North American cost position, underpinned by access to low-cost natural gas, helped translate these industry tailwinds into free cash flow that could be directed toward dividends, balance sheet improvement, and other shareholder-friendly actions. Investors should note that these cyclical factors can reverse, and the nitrogen fertilizer industry has historically exhibited volatility in pricing and profitability.
Looking ahead, potential return drivers for CF include the company’s exposure to long-term agricultural demand growth, its efforts to reduce carbon intensity and develop low-carbon ammonia for industrial and energy applications, and management’s capital allocation policy between dividends, buybacks, and growth investments. At the same time, prospective investors should weigh material risks, including commodity price cycles, natural gas cost volatility, regulatory and environmental policy developments, and competition from global producers. As with any cyclical equity, past performance over a favorable period should not be extrapolated mechanically into the future.
For income-oriented investors, the interaction between dividend growth and purchase price remains central. If CF were to continue to raise its dividend over time — a function of sustainable free cash flow, balance sheet strength, and management priorities — the yield on cost for long-term holders could become increasingly attractive, even if the current indicated yield at market price remains in the low single digits.
One more piece of investment wisdom to leave you with:
“If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he is wrong.” — Bernard Baruch
For investors evaluating names such as CF Industries, these perspectives suggest a disciplined framework: focus on long-term fundamentals rather than short-term market noise, recognize the compounding power of reinvested dividends, and remain realistic about the cyclical nature of returns in commodity-linked businesses.
