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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 2018, investors considering an investment into shares of Thermo Fisher Scientific Inc (NYSE: TMO) 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: 01/11/2018
$10,000

01/11/2018
  $27,551

01/10/2023
End date: 01/10/2023
Start price/share: $208.66
End price/share: $568.03
Starting shares: 47.92
Ending shares: 48.51
Dividends reinvested/share: $4.56
Total return: 175.57%
Average annual return: 22.47%
Starting investment: $10,000.00
Ending investment: $27,551.71

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 22.47%. This would have turned a $10K investment made 5 years ago into $27,551.71 today (as of 01/10/2023). On a total return basis, that’s a result of 175.57% (something to think about: how might TMO shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Beyond share price change, another component of TMO’s total return these past 5 years has been the payment by Thermo Fisher Scientific Inc of $4.56/share in dividends to shareholders. Automatic reinvestment of dividends can be a wonderful way to compound returns, and for the above calculations we presume that dividends are reinvested into additional shares of stock. (For the purpose of these calcuations, the closing price on ex-date is used).

Based upon the most recent annualized dividend rate of 1.2/share, we calculate that TMO has a current yield of approximately 0.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.2 against the original $208.66/share purchase price. This works out to a yield on cost of 0.10%.

Here’s one more great investment quote before you go:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens