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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

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 Applied Materials, Inc. (NASD: AMAT) back in 2018: 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: 04/19/2018


End date: 04/18/2023
Start price/share: $51.19
End price/share: $111.27
Starting shares: 195.35
Ending shares: 208.34
Dividends reinvested/share: $4.52
Total return: 131.82%
Average annual return: 18.31%
Starting investment: $10,000.00
Ending investment: $23,179.67

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 18.31%. This would have turned a $10K investment made 5 years ago into $23,179.67 today (as of 04/18/2023). On a total return basis, that’s a result of 131.82% (something to think about: how might AMAT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Applied Materials, Inc. paid investors a total of $4.52/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 1.28/share, we calculate that AMAT has a current yield of approximately 1.15%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.28 against the original $51.19/share purchase price. This works out to a yield on cost of 2.25%.

Here’s one more great investment quote before you go:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra