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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Microsoft Corporation (NASD: MSFT) back in 2019, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 04/02/2019


End date: 04/01/2024
Start price/share: $119.19
End price/share: $424.57
Starting shares: 83.90
Ending shares: 88.15
Dividends reinvested/share: $11.90
Total return: 274.27%
Average annual return: 30.19%
Starting investment: $10,000.00
Ending investment: $37,428.47

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 30.19%. This would have turned a $10K investment made 5 years ago into $37,428.47 today (as of 04/01/2024). On a total return basis, that’s a result of 274.27% (something to think about: how might MSFT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Microsoft Corporation paid investors a total of $11.90/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 3/share, we calculate that MSFT has a current yield of approximately 0.71%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3 against the original $119.19/share purchase price. This works out to a yield on cost of 0.60%.

More investment wisdom to ponder:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein