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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 Medtronic PLC (NYSE: MDT)? Today, we examine the outcome of a five year investment into the stock back in 2019.

Start date: 01/17/2019
$10,000

01/17/2019
  $11,237

01/16/2024
End date: 01/16/2024
Start price/share: $87.60
End price/share: $86.54
Starting shares: 114.16
Ending shares: 129.85
Dividends reinvested/share: $12.29
Total return: 12.37%
Average annual return: 2.36%
Starting investment: $10,000.00
Ending investment: $11,237.03

The above analysis shows the five year investment result worked out as follows, with an annualized rate of return of 2.36%. This would have turned a $10K investment made 5 years ago into $11,237.03 today (as of 01/16/2024). On a total return basis, that’s a result of 12.37% (something to think about: how might MDT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Medtronic PLC paid investors a total of $12.29/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 2.76/share, we calculate that MDT has a current yield of approximately 3.19%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.76 against the original $87.60/share purchase price. This works out to a yield on cost of 3.64%.

Here’s one more great investment quote before you go:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman