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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 Philip Morris International Inc (NYSE: PM) 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: 11/29/2018


End date: 11/28/2023
Start price/share: $86.96
End price/share: $94.15
Starting shares: 115.00
Ending shares: 152.75
Dividends reinvested/share: $24.28
Total return: 43.81%
Average annual return: 7.54%
Starting investment: $10,000.00
Ending investment: $14,383.02

The above analysis shows the five year investment result worked out well, with an annualized rate of return of 7.54%. This would have turned a $10K investment made 5 years ago into $14,383.02 today (as of 11/28/2023). On a total return basis, that’s a result of 43.81% (something to think about: how might PM shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Philip Morris International Inc paid investors a total of $24.28/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 5.2/share, we calculate that PM has a current yield of approximately 5.52%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.2 against the original $86.96/share purchase price. This works out to a yield on cost of 6.35%.

Another great investment quote to think about:
“Markets can remain irrational longer than you can remain solvent.” — John Maynard Keynes