“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 Gilead Sciences Inc (NASD: GILD)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 04/10/2017 |
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| End date: | 04/07/2022 | ||||
| Start price/share: | $66.42 | ||||
| End price/share: | $60.99 | ||||
| Starting shares: | 150.56 | ||||
| Ending shares: | 181.19 | ||||
| Dividends reinvested/share: | $12.65 | ||||
| Total return: | 10.51% | ||||
| Average annual return: | 2.02% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,050.43 | ||||
As we can see, the five year investment result worked out as follows, with an annualized rate of return of 2.02%. This would have turned a $10K investment made 5 years ago into $11,050.43 today (as of 04/07/2022). On a total return basis, that’s a result of 10.51% (something to think about: how might GILD shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Gilead Sciences Inc paid investors a total of $12.65/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 2.92/share, we calculate that GILD has a current yield of approximately 4.79%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.92 against the original $66.42/share purchase price. This works out to a yield on cost of 7.21%.
One more piece of investment wisdom 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
