“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we will have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our confidence in any given company we might invest into, and keep our eyes on the long-term time horizon. The market may go up and down in the interim, but over a decade-long holding period, will the investment succeed?
Back in 2016, investors may have been asking themselves that very question about International Business Machines Corp (NYSE: IBM). IBM entered that period as a mature technology and services company undergoing a strategic transition away from legacy hardware and consulting toward higher-value software, hybrid cloud infrastructure, and artificial intelligence offerings.
Let’s examine what would have happened over a decade-long holding period, had you invested in IBM shares back in 2016 and held on.
| Start date: | 03/17/2016 |
|
|||
| End date: | 03/16/2026 | ||||
| Start price/share: | $140.57 | ||||
| End price/share: | $249.25 | ||||
| Starting shares: | 71.14 | ||||
| Ending shares: | 108.43 | ||||
| Dividends reinvested/share: | $62.58 | ||||
| Total return: | 170.27% | ||||
| Average annual return: | 10.45% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,025.61 | ||||
As we can see, the decade-long investment result worked out quite well, with an annualized rate of return of 10.45%. This would have turned a $10K investment made 10 years ago into $27,025.61 today (as of 03/16/2026). On a total return basis, that is a result of 170.27%.
Context is important. Over this same period, the broad U.S. equity market delivered strong gains, and mega-cap technology stocks in particular materially outperformed the average. IBM’s 10.45% annualized return would have lagged the largest growth-oriented technology platforms but compares competitively with many diversified dividend-focused strategies. For a mature, income-oriented technology name operating through a multiyear business transformation, that level of compounding is noteworthy.
Behind those numbers, IBM executed on several strategic priorities between 2016 and 2026:
- It sharpened its focus on hybrid cloud and artificial intelligence, highlighted by the acquisition and integration of Red Hat, which strengthened IBM’s open-source and hybrid cloud capabilities.
- It continued to shift revenue toward software, consulting, and recurring subscription-based services, aiming to improve margins and reduce cyclicality.
- It completed portfolio rationalizations, including spinning off its managed infrastructure services business (Kyndryl Holdings, Inc.), simplifying IBM’s operating structure and capital allocation priorities.
- It maintained a strong emphasis on shareholder returns through a sustained dividend program, even as share repurchases were scaled back in parts of the period to prioritize investment and balance-sheet strength.
Something for long-term investors to consider is not only what those numbers show in hindsight, but how the underlying corporate strategy and capital allocation policies contributed to the outcome — and, in turn, how IBM shares might perform over the next 10 years.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Always an important consideration with a dividend-paying company is: should we reinvest our dividends? Over the past 10 years, International Business Machines Corp has paid $62.58/share in dividends. For the above analysis, we assume that the investor reinvests dividends into new shares of stock (for the above calculations, the reinvestment is performed using closing price on ex-div date for that dividend).
Without dividend reinvestment, the ending value would have been meaningfully lower, as the investor would have missed the compounding effect of acquiring additional shares at various points in the cycle, including during periods of price weakness. The fact that starting shares of 71.14 grew to 108.43 shares illustrates how reinvested dividends can steadily increase ownership in a company over time.
Based upon the most recent annualized dividend rate of 6.72/share, we calculate that IBM has a current yield of approximately 2.70%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 6.72 against the original $140.57/share purchase price. This works out to a yield on cost of 1.92%.
For an income-focused shareholder who bought in 2016, that means every original share is now generating an annual cash flow that is nearly 2% of the initial purchase price, and the total dollar income stream has grown as additional shares were accumulated through reinvestment. In practice, many investors eventually elect to stop reinvesting dividends and instead use that income to help fund spending needs in retirement, effectively converting the accumulated position into a growing cash-flow asset.
From a risk perspective, the decade under review also encompassed substantial volatility — including global economic uncertainty, rapid changes in enterprise IT spending patterns, and market rotations between growth and value factors. An investor who adhered to Buffett’s philosophy and maintained a 10-year horizon would have needed to hold through several challenging years in which IBM’s share price underperformed faster-growing peers before the company’s strategic repositioning began to be better reflected in market valuations.
Ultimately, the IBM experience across 2016‑2026 provides a case study in the power of time horizon, the importance of dividends and reinvestment to total return, and the role of corporate transformation in shaping long-run shareholder outcomes.
More investment wisdom to ponder:
“The policy of being too cautious is the greatest risk of all.” — Jawaharlal Nehru
