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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

This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?

For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2020, investors considering an investment into shares of Williams Cos Inc (NYSE: WMB) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.

Start date: 05/21/2020
$10,000

05/21/2020
  $40,044

05/20/2025
End date: 05/20/2025
Start price/share: $19.47
End price/share: $58.77
Starting shares: 513.61
Ending shares: 681.39
Dividends reinvested/share: $8.73
Total return: 300.45%
Average annual return: 31.98%
Starting investment: $10,000.00
Ending investment: $40,044.29

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 31.98%. This would have turned a $10K investment made 5 years ago into $40,044.29 today (as of 05/20/2025). On a total return basis, that’s a result of 300.45% (something to think about: how might WMB shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Williams Cos Inc paid investors a total of $8.73/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 2/share, we calculate that WMB has a current yield of approximately 3.40%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2 against the original $19.47/share purchase price. This works out to a yield on cost of 17.46%.

More investment wisdom to ponder:
“He who earns and does not invest will have to work for the rest of his life.” — Debasish Mridha