“I buy on the assumption that they could close the market the next day and not reopen it for five 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 five year holding period, will the investment succeed in building shareholder value on a total return basis?
Back in 2021, investors may have been asking themselves that very question about Labcorp Holdings Inc (known at the time as Laboratory Corporation of America Holdings; NYSE: LH). Labcorp is a leading global life sciences company providing diagnostic testing services and central laboratory support to pharmaceutical and biotechnology companies, and it was also a major provider of COVID‑19 testing during the pandemic.
Let’s examine what would have happened over a five year holding period, had you invested in LH shares back in 2021 and held on through market volatility, internal portfolio changes and a corporate spin-off.
| Start date: | 03/16/2021 |
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| End date: | 03/13/2026 | ||||
| Start price/share: | $205.09 | ||||
| End price/share: | $263.80 | ||||
| Starting shares: | 48.76 | ||||
| Ending shares: | 51.18 | ||||
| Dividends reinvested/share: | $11.01 | ||||
| Total return: | 35.02% | ||||
| Average annual return: | 6.20% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,504.53 | ||||
As we can see, the five year investment result worked out constructively, with an annualized rate of return of 6.20%. This would have turned a $10K investment made five years ago into $13,504.53 today (as of 03/13/2026). On a total return basis, that is a gain of 35.02%.
For context, that period spans an unusually volatile environment for health care and diagnostics: the fading of pandemic-related testing revenue, a sharp rotation away from COVID‑19 beneficiaries, higher interest rates pressuring valuation multiples, and continued secular growth in routine testing, specialty diagnostics and clinical trial services. Against that backdrop, a mid‑single‑digit annualized return reflects both the resilience of the business and the headwind from normalizing earnings.
It is also worth noting that Labcorp executed a significant portfolio move during this timeframe. In 2023, the company completed the spin-off of its Clinical Development business into a separate publicly traded company, Fortrea Holdings Inc. While the table above focuses on the performance of the LH shares themselves (including reinvested dividends), investors who held through the separation also received Fortrea shares, which have their own independent trading performance. That additional value is not reflected in the simple LH-only return figures.
Always an important consideration with a dividend-paying company is: should we reinvest our dividends? Over the past five years, Labcorp Holdings Inc has paid $11.01/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 the closing price on the ex-dividend date for each dividend.
Dividend reinvestment is particularly relevant for Labcorp because the company is a relatively recent dividend payer. Labcorp initiated a quarterly cash dividend in 2021, adding an income component to what had historically been a growth- and acquisition-driven story. Although the current yield is modest, the policy signals a more shareholder-return-oriented capital allocation framework, alongside share repurchases and targeted M&A.
Based upon the most recent annualized dividend rate of 2.88/share, we calculate that LH has a current yield of approximately 1.09%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.88 against the original $205.09/share purchase price. This works out to a yield on cost of 0.53%.
Over time, if Labcorp is able to grow its dividend in line with earnings and cash flow, that yield on cost could rise for long-term holders, even if the headline yield remains low due to price appreciation. For investors focused on total return rather than near-term income, this combination of moderate dividend growth, share repurchases and underlying business expansion can be appealing, provided valuation is reasonable and the company maintains its competitive position in diagnostics and drug development services.
Of course, past performance does not guarantee future results. Looking forward, key variables for Labcorp shareholders over the next five years will include the pace of recovery in routine testing volumes, the trajectory of reimbursement rates, the mix shift toward higher-value specialty and oncology testing, the contribution from central laboratory and clinical trial services, and management’s capital allocation between organic investment, M&A, dividends and buybacks. Regulatory developments around laboratory-developed tests and health-care payment models also bear watching.
More investment wisdom to ponder:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein
For long-term investors, the Labcorp example illustrates how a disciplined, five year holding period in a high-quality, cash-generative business can still produce respectable total returns even through a challenging macro backdrop, particularly when dividends are systematically reinvested and when corporate actions such as spin-offs are considered as part of the total shareholder value equation.
