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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
The Warren Buffett investment philosophy emphasizes purchasing quality businesses and holding them for extended periods, often five years or longer. That mindset encourages investors to look past short-term volatility and focus on business fundamentals and compounding. How would such a long-term approach have worked out for an investment in Equifax Inc. (
NYSE: EFX ) initiated in 2021? What follows is a look at the total return outcome for a hypothetical five year investment, including reinvested dividends.
Equifax is one of the three major U.S. consumer credit reporting bureaus, alongside TransUnion and Experian. The company generates revenue from credit information services, decisioning solutions and analytics sold to lenders, as well as from identity and fraud solutions and various workforce data services. Its cash flows have historically supported consistent dividend payments, making it a relevant candidate for a dividend reinvestment analysis over a multi-year period.
| Start date: | 03/24/2021 |
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| End date: | 03/23/2026 | ||||
| Start price/share: | $174.41 | ||||
| End price/share: | $179.65 | ||||
| Starting shares: | 57.34 | ||||
| Ending shares: | 59.48 | ||||
| Dividends reinvested/share: | $8.30 | ||||
| Total return: | 6.85% | ||||
| Average annual return: | 1.33% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,682.93 | ||||
As shown above, the five year investment result translated into an annualized rate of return of 1.33%. A hypothetical $10,000 allocation to Equifax shares on 03/24/2021 would have grown to $10,682.93 by 03/23/2026, assuming dividends were reinvested throughout the period. On a cumulative basis, that equates to a total return of 6.85%.
That performance reflects both modest share price appreciation and the contribution of dividends. Over the same period, broad U.S. equity benchmarks such as the S&P 500 delivered substantially higher annualized returns, underscoring the importance of benchmarking individual holdings against a diversified index. At the same time, the result also highlights the defensive nature of some cash-generative information services businesses, which may deliver relatively stable but unspectacular returns over certain five year windows.
Beyond share price change, another component of EFX’s total return over these five years was the payment of $8.30 per share in dividends to shareholders. Automatic reinvestment of those dividends into additional EFX shares increased the share count from 57.34 to 59.48 over the period, helping to compound future income and capital growth. For the above calculations, it is assumed that all dividends are reinvested and that the closing price on the ex-dividend date is used for reinvestment.
Dividend policy is an important element of Equifax’s overall capital allocation strategy. The company has historically combined a regular dividend with internal investment in technology and data assets, and has periodically used share repurchases and acquisitions to drive growth. Investors focused on income should note that, while the dividend enhances total return, EFX is not a high-yield stock; its appeal is more closely tied to long-term earnings growth driven by demand for credit data, risk analytics and identity solutions.
Based upon the most recent annualized dividend rate of $2.24 per share, we calculate that
EFX has a current yield of approximately 1.25%. Another useful metric for long-term investors is “yield on cost” — the current annualized dividend expressed as a percentage of the original purchase price. Comparing the $2.24 annual dividend to the $174.41 per share entry price results in a yield on cost of 0.72%.
While the improvement in yield on cost over this particular five year span has been limited, many investors in dividend growth strategies focus on positions where the dividend per share rises steadily over longer horizons. If Equifax is able to grow earnings and increase its dividend over time, yield on cost for a 2021 investor could look progressively more attractive beyond this initial five year holding period.
It is also worth considering the risk factors that may have influenced Equifax’s share performance during this timeframe. The company continues to operate under heightened regulatory and cybersecurity scrutiny following its widely publicized 2017 data breach. In addition, macroeconomic conditions — including changes in interest rates, consumer credit demand and housing activity — can affect transaction volumes across its credit and mortgage-related businesses. These variables can contribute to periods of both outperformance and underperformance relative to the broader market.
For investors applying a Buffett-style long-term discipline, the Equifax example reinforces two key points. First, even well-established, cash-generative companies can deliver only modest returns over certain five year stretches, particularly when purchased at a full valuation. Second, the compounding impact of reinvested dividends, while helpful, does not fully offset the effect of subdued earnings or multiple compression. As always, past performance should be viewed as one data point within a broader fundamental and valuation assessment.
Another great investment quote to reflect on:
“Those who do not remember the past are condemned to repeat it.” — George Santayana
Long-term investors evaluating Equifax today may wish to review not only historical return statistics, but also the company’s earnings trajectory, balance sheet strength, competitive positioning against other credit bureaus and data providers, and management’s guidance on growth initiatives. How EFX shares perform over the next five years will ultimately depend on the interaction between those fundamentals, valuation at the time of purchase and the broader economic environment.
[The performance figures and dividend reinvestment values presented above were computed with the
Dividend Channel DRIP Returns Calculator.]
