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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 above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period?

Today, let’s look backwards in time to 2015, and take a look at what happened to investors who asked that very question about Mondelez International Inc (NASD: MDLZ), by taking a look at the investment outcome over a five year holding period.

Start date: 07/17/2015


End date: 07/16/2020
Start price/share: $41.89
End price/share: $53.04
Starting shares: 238.72
Ending shares: 263.47
Dividends reinvested/share: $4.50
Total return: 39.75%
Average annual return: 6.92%
Starting investment: $10,000.00
Ending investment: $13,975.73

The above analysis shows the five year investment result worked out well, with an annualized rate of return of 6.92%. This would have turned a $10K investment made 5 years ago into $13,975.73 today (as of 07/16/2020). On a total return basis, that’s a result of 39.75% (something to think about: how might MDLZ shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Mondelez International Inc paid investors a total of $4.50/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 1.14/share, we calculate that MDLZ has a current yield of approximately 2.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.14 against the original $41.89/share purchase price. This works out to a yield on cost of 5.13%.

One more piece of investment wisdom to leave you with:
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle