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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Mondelez International Inc (NASD: MDLZ) back in 2016: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 06/03/2016


End date: 06/02/2021
Start price/share: $45.24
End price/share: $63.62
Starting shares: 221.04
Ending shares: 245.01
Dividends reinvested/share: $4.94
Total return: 55.88%
Average annual return: 9.28%
Starting investment: $10,000.00
Ending investment: $15,584.88

As shown above, the five year investment result worked out well, with an annualized rate of return of 9.28%. This would have turned a $10K investment made 5 years ago into $15,584.88 today (as of 06/02/2021). On a total return basis, that’s a result of 55.88% (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 $4.94/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 1.26/share, we calculate that MDLZ has a current yield of approximately 1.98%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.26 against the original $45.24/share purchase price. This works out to a yield on cost of 4.38%.

More investment wisdom to ponder:
“A market downturn doesn’t bother us. It is an opportunity to increase our ownership of great companies with great management at good prices.” — Warren Buffett