“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period? Will revenues, earnings power and competitive position be stronger, weaker, or broadly unchanged?
Today, let’s look backwards in time to 2021, and take a look at what happened to investors who asked that very question about Moody’s Corp. (NYSE: MCO), by examining the investment outcome over a five year holding period and placing that outcome in a broader fundamental context.
| Start date: | 03/15/2021 |
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| End date: | 03/12/2026 | ||||
| Start price/share: | $297.36 | ||||
| End price/share: | $426.47 | ||||
| Starting shares: | 33.63 | ||||
| Ending shares: | 35.06 | ||||
| Dividends reinvested/share: | $15.93 | ||||
| Total return: | 49.50% | ||||
| Average annual return: | 8.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,947.01 | ||||
As we can see, the five year investment result worked out well, with an annualized rate of return of 8.38%. This would have turned a $10K investment made 5 years ago into $14,947.01 today (as of 03/12/2026). On a total return basis, that’s a result of 49.50% (something to think about: how might MCO shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
For context, that 8.38% annualized five year return spans an unusually volatile macro backdrop that included the tail end of the COVID-19 period, a sharp rise in global inflation, and one of the most aggressive interest rate hiking cycles by the U.S. Federal Reserve in decades. Credit markets experienced periods of both exuberant issuance and pronounced risk aversion, directly influencing activity levels for a franchise such as Moody’s that is deeply tied to debt capital markets.
Notice that Moody’s Corp. paid investors a total of $15.93/share in dividends over the 5 year 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). The modest increase in share count from 33.63 to 35.06 reflects that compounding effect in action.
Moody’s is widely recognized as one of the leading global credit rating agencies, alongside S&P Global, and also operates a growing analytics and data business. The company’s business model tends to be structurally high margin, with attractive free cash flow generation, but it is cyclical: rating volumes rise and fall with corporate, sovereign and structured finance issuance. Over the 2021‑2026 period, investors had to navigate swings in issuance volumes as borrowers alternated between locking in low rates and pausing new deals during periods of market stress.
Based upon the most recent annualized dividend rate of 4.12/share, we calculate that MCO has a current yield of approximately 0.97%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.12 against the original $297.36/share purchase price. This works out to a yield on cost of 0.33%.
Although Moody’s current dividend yield is below 1%, the company has an established pattern of regularly increasing its dividend over time, supported by strong cash generation. For long term shareholders, the combination of earnings growth, share repurchases when executed, and a steadily rising dividend can be more important than the starting yield alone.
It is also notable that a roughly 50% total return over this five year span was achieved despite valuation starting from an elevated base in early 2021, when many quality growth and “compounder” equities traded at premium multiples. That experience underscores a key point for long horizon investors: even when entry valuations are not especially depressed, durable franchises with defensible competitive positions can still compound capital at respectable rates, provided that underlying earnings continue to grow.
Another great investment quote to think about:
“You can’t restate a dividend.” — Malon Wilkus
For income oriented investors, that remark serves as a reminder that while accounting metrics can be revised, a cash dividend actually paid and reinvested is a permanent component of return. In the case of Moody’s over this period, dividends were a smaller contributor than price appreciation, but they nonetheless added incremental return and slightly increased the investor’s ownership stake through reinvestment.
Looking ahead, the future path of returns for MCO will depend on factors including global economic growth, corporate and sovereign borrowing needs, the interest rate environment, regulatory developments affecting credit ratings, and the company’s success in expanding its data and analytics offerings. As always, past performance over one five year window should be viewed as one input among many in a broader due diligence process.
