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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 Analog Devices Inc (NASD: ADI)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 07/03/2014


End date: 07/02/2019
Start price/share: $54.83
End price/share: $113.51
Starting shares: 182.38
Ending shares: 205.68
Dividends reinvested/share: $8.82
Total return: 133.47%
Average annual return: 18.48%
Starting investment: $10,000.00
Ending investment: $23,346.69

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 18.48%. This would have turned a $10K investment made 5 years ago into $23,346.69 today (as of 07/02/2019). On a total return basis, that’s a result of 133.47% (something to think about: how might ADI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Analog Devices Inc paid investors a total of $8.82/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 2.16/share, we calculate that ADI has a current yield of approximately 1.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.16 against the original $54.83/share purchase price. This works out to a yield on cost of 3.47%.

Here’s one more great investment quote before you go:
“When everyone is going right, look left.” — Sam Zell