“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 Pfizer Inc (NYSE: PFE)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 04/07/2020 |
|
|||
| End date: | 04/04/2025 | ||||
| Start price/share: | $31.89 | ||||
| End price/share: | $22.97 | ||||
| Starting shares: | 313.58 | ||||
| Ending shares: | 391.26 | ||||
| Dividends reinvested/share: | $7.99 | ||||
| Total return: | -10.13% | ||||
| Average annual return: | -2.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,985.06 | ||||
The above analysis shows the five year investment result worked out poorly, with an annualized rate of return of -2.12%. This would have turned a $10K investment made 5 years ago into $8,985.06 today (as of 04/04/2025). On a total return basis, that’s a result of -10.13% (something to think about: how might PFE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pfizer Inc paid investors a total of $7.99/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 1.72/share, we calculate that PFE has a current yield of approximately 7.49%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.72 against the original $31.89/share purchase price. This works out to a yield on cost of 23.49%.
Another great investment quote to think about:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
