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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 Activision Blizzard, Inc. (NASD: ATVI), by taking a look at the investment outcome over a five year holding period.

Start date: 07/02/2015


End date: 07/01/2020
Start price/share: $24.63
End price/share: $78.03
Starting shares: 406.01
Ending shares: 419.95
Dividends reinvested/share: $1.68
Total return: 227.69%
Average annual return: 26.78%
Starting investment: $10,000.00
Ending investment: $32,774.50

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 26.78%. This would have turned a $10K investment made 5 years ago into $32,774.50 today (as of 07/01/2020). On a total return basis, that’s a result of 227.69% (something to think about: how might ATVI shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Activision Blizzard, Inc. paid investors a total of $1.68/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 .41/share, we calculate that ATVI has a current yield of approximately 0.53%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .41 against the original $24.63/share purchase price. This works out to a yield on cost of 2.15%.

One more investment quote to leave you with:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch