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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

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 Baxter International Inc (NYSE: BAX)? Today, we examine the outcome of a five year investment into the stock back in 2017.

Start date: 12/21/2017


End date: 12/20/2022
Start price/share: $64.53
End price/share: $49.93
Starting shares: 154.97
Ending shares: 165.19
Dividends reinvested/share: $4.77
Total return: -17.52%
Average annual return: -3.78%
Starting investment: $10,000.00
Ending investment: $8,247.58

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -3.78%. This would have turned a $10K investment made 5 years ago into $8,247.58 today (as of 12/20/2022). On a total return basis, that’s a result of -17.52% (something to think about: how might BAX shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Baxter International Inc paid investors a total of $4.77/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 1.16/share, we calculate that BAX has a current yield of approximately 2.32%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.16 against the original $64.53/share purchase price. This works out to a yield on cost of 3.60%.

Another great investment quote to think about:
“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