“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 Automatic Data Processing Inc. (NASD: ADP)? Today, we examine the outcome of a five year investment into the stock back in 2021.
| Start date: | 01/08/2021 |
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| End date: | 01/07/2026 | ||||
| Start price/share: | $171.05 | ||||
| End price/share: | $261.26 | ||||
| Starting shares: | 58.46 | ||||
| Ending shares: | 64.85 | ||||
| Dividends reinvested/share: | $25.41 | ||||
| Total return: | 69.43% | ||||
| Average annual return: | 11.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $16,941.86 | ||||
As we can see, the five year investment result worked out quite well, with an annualized rate of return of 11.12%. This would have turned a $10K investment made 5 years ago into $16,941.86 today (as of 01/07/2026). On a total return basis, that’s a result of 69.43% (something to think about: how might ADP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Automatic Data Processing Inc. paid investors a total of $25.41/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 6.8/share, we calculate that ADP has a current yield of approximately 2.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6.8 against the original $171.05/share purchase price. This works out to a yield on cost of 1.52%.
More investment wisdom to ponder:
“Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.” — Warren Buffett
