“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 Merck & Co Inc (NYSE: MRK)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 06/24/2020 |
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| End date: | 06/23/2025 | ||||
| Start price/share: | $72.40 | ||||
| End price/share: | $80.16 | ||||
| Starting shares: | 138.12 | ||||
| Ending shares: | 161.30 | ||||
| Dividends reinvested/share: | $14.31 | ||||
| Total return: | 29.29% | ||||
| Average annual return: | 5.27% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,927.76 | ||||
The above analysis shows the five year investment result worked out well, with an annualized rate of return of 5.27%. This would have turned a $10K investment made 5 years ago into $12,927.76 today (as of 06/23/2025). On a total return basis, that’s a result of 29.29% (something to think about: how might MRK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Merck & Co Inc paid investors a total of $14.31/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 3.24/share, we calculate that MRK has a current yield of approximately 4.04%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.24 against the original $72.40/share purchase price. This works out to a yield on cost of 5.58%.
Another great investment quote to think about:
“In the long run, we are all dead.” — John Maynard Keynes
