“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 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 ten year holding period possibly?
Suppose a “buyandhold” investor was considering an investment into Pfizer Inc (NYSE: PFE) back in 2014: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.
Start date:  07/31/2014 


End date:  07/30/2024  
Start price/share:  $27.23  
End price/share:  $31.39  
Starting shares:  367.24  
Ending shares:  541.61  
Dividends reinvested/share:  $13.82  
Total return:  70.01%  
Average annual return:  5.45%  
Starting investment:  $10,000.00  
Ending investment:  $17,005.61 
As we can see, the ten year investment result worked out well, with an annualized rate of return of 5.45%. This would have turned a $10K investment made 10 years ago into $17,005.61 today (as of 07/30/2024). On a total return basis, that’s a result of 70.01% (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 $13.82/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 exdate 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 5.35%. 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 $27.23/share purchase price. This works out to a yield on cost of 19.65%.
One more piece of investment wisdom to leave you with:
“Value investing is at its core the marriage of a contrarian streak and a calculator.” — Seth Klarman