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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 Visa Inc (NYSE: V)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 02/18/2016


End date: 02/17/2021
Start price/share: $71.24
End price/share: $207.51
Starting shares: 140.37
Ending shares: 145.12
Dividends reinvested/share: $4.60
Total return: 201.14%
Average annual return: 24.65%
Starting investment: $10,000.00
Ending investment: $30,110.89

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 24.65%. This would have turned a $10K investment made 5 years ago into $30,110.89 today (as of 02/17/2021). On a total return basis, that’s a result of 201.14% (something to think about: how might V shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Visa Inc paid investors a total of $4.60/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 1.28/share, we calculate that V has a current yield of approximately 0.62%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.28 against the original $71.24/share purchase price. This works out to a yield on cost of 0.87%.

More investment wisdom to ponder:
“I think you have to learn that there’s a company behind every stock, and that there’s only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.” — Peter Lynch