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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2017, investors considering an investment into shares of Eli Lilly (NYSE: LLY) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 10/16/2017


End date: 10/13/2022
Start price/share: $85.95
End price/share: $332.10
Starting shares: 116.35
Ending shares: 128.49
Dividends reinvested/share: $14.65
Total return: 326.70%
Average annual return: 33.71%
Starting investment: $10,000.00
Ending investment: $42,670.54

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 33.71%. This would have turned a $10K investment made 5 years ago into $42,670.54 today (as of 10/13/2022). On a total return basis, that’s a result of 326.70% (something to think about: how might LLY shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Eli Lilly paid investors a total of $14.65/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 3.92/share, we calculate that LLY has a current yield of approximately 1.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.92 against the original $85.95/share purchase price. This works out to a yield on cost of 1.37%.

One more piece of investment wisdom to leave you with:
“You can get in much more trouble with a good idea than a bad idea, because you forget that the good idea has limits.” — Benjamin Graham