Photo credit:

“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 Dover Corp (NYSE: DOV) back in 2017: 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: 05/22/2017


End date: 05/19/2022
Start price/share: $67.16
End price/share: $129.54
Starting shares: 148.90
Ending shares: 163.27
Dividends reinvested/share: $9.32
Total return: 111.50%
Average annual return: 16.18%
Starting investment: $10,000.00
Ending investment: $21,149.49

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 16.18%. This would have turned a $10K investment made 5 years ago into $21,149.49 today (as of 05/19/2022). On a total return basis, that’s a result of 111.50% (something to think about: how might DOV shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Dover Corp paid investors a total of $9.32/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/share, we calculate that DOV has a current yield of approximately 1.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $67.16/share purchase price. This works out to a yield on cost of 2.29%.

Another great investment quote to think about:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” — Warren Buffett