“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten 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 ten year investment into the stock back in 2014.
| Start date: | 02/03/2014 |
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| End date: | 01/31/2024 | ||||
| Start price/share: | $29.03 | ||||
| End price/share: | $27.08 | ||||
| Starting shares: | 344.47 | ||||
| Ending shares: | 506.95 | ||||
| Dividends reinvested/share: | $13.72 | ||||
| Total return: | 37.28% | ||||
| Average annual return: | 3.22% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,727.80 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 3.22%. This would have turned a $10K investment made 10 years ago into $13,727.80 today (as of 01/31/2024). On a total return basis, that’s a result of 37.28% (something to think about: how might PFE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pfizer Inc paid investors a total of $13.72/share in dividends over the 10 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 6.20%. 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 $29.03/share purchase price. This works out to a yield on cost of 21.36%.
Another great investment quote to think about:
“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” — Warren Buffett
