“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Pfizer Inc (NYSE: PFE)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 02/20/2004 |
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| End date: | 02/16/2024 | ||||
| Start price/share: | $35.36 | ||||
| End price/share: | $27.62 | ||||
| Starting shares: | 282.81 | ||||
| Ending shares: | 620.69 | ||||
| Dividends reinvested/share: | $22.10 | ||||
| Total return: | 71.43% | ||||
| Average annual return: | 2.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,138.70 | ||||
The above analysis shows the twenty year investment result worked out as follows, with an annualized rate of return of 2.73%. This would have turned a $10K investment made 20 years ago into $17,138.70 today (as of 02/16/2024). On a total return basis, that’s a result of 71.43% (something to think about: how might PFE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pfizer Inc paid investors a total of $22.10/share in dividends over the 20 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 1.68/share, we calculate that PFE has a current yield of approximately 6.08%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.68 against the original $35.36/share purchase price. This works out to a yield on cost of 17.19%.
Another great investment quote to think about:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
