Photo credit:

“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 Mastercard Inc (NYSE: MA)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 07/01/2014


End date: 06/28/2019
Start price/share: $75.53
End price/share: $264.53
Starting shares: 132.40
Ending shares: 136.98
Dividends reinvested/share: $4.16
Total return: 262.36%
Average annual return: 29.40%
Starting investment: $10,000.00
Ending investment: $36,229.14

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 29.40%. This would have turned a $10K investment made 5 years ago into $36,229.14 today (as of 06/28/2019). On a total return basis, that’s a result of 262.36% (something to think about: how might MA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Mastercard Inc paid investors a total of $4.16/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 1.32/share, we calculate that MA has a current yield of approximately 0.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.32 against the original $75.53/share purchase price. This works out to a yield on cost of 0.66%.

Another great investment quote to think about:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett