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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 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 ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Gilead Sciences Inc (NASD: GILD) back in 2011: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 09/27/2011


End date: 09/24/2021
Start price/share: $20.03
End price/share: $71.19
Starting shares: 499.25
Ending shares: 612.76
Dividends reinvested/share: $14.86
Total return: 336.22%
Average annual return: 15.87%
Starting investment: $10,000.00
Ending investment: $43,622.45

As shown above, the ten year investment result worked out exceptionally well, with an annualized rate of return of 15.87%. This would have turned a $10K investment made 10 years ago into $43,622.45 today (as of 09/24/2021). On a total return basis, that’s a result of 336.22% (something to think about: how might GILD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Gilead Sciences Inc paid investors a total of $14.86/share in dividends over the 10 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 2.84/share, we calculate that GILD has a current yield of approximately 3.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.84 against the original $20.03/share purchase price. This works out to a yield on cost of 19.92%.

Another great investment quote to think about:
“The right time for a company to finance its growth is not when it needs capital, but rather when the market is most receptive to providing capital.” — Michael Milken