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 Gilead Sciences Inc (NASD: GILD)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 05/01/2015


End date: 04/30/2020
Start price/share: $105.01
End price/share: $84.00
Starting shares: 95.23
Ending shares: 109.78
Dividends reinvested/share: $10.69
Total return: -7.78%
Average annual return: -1.61%
Starting investment: $10,000.00
Ending investment: $9,220.10

The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -1.61%. This would have turned a $10K investment made 5 years ago into $9,220.10 today (as of 04/30/2020). On a total return basis, that’s a result of -7.78% (something to think about: how might GILD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Gilead Sciences Inc paid investors a total of $10.69/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 2.72/share, we calculate that GILD has a current yield of approximately 3.24%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.72 against the original $105.01/share purchase price. This works out to a yield on cost of 3.09%.

One more investment quote to leave you with:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks