“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a useful question to ask is whether we would still be comfortable making the investment if we could not sell it for many years.
A traditional buy-and-hold approach often calls for a time horizon that spans many years — potentially even multiple decades. Suppose such a buy-and-hold investor had looked into buying shares of Pfizer Inc (NYSE: PFE) back in 2006, and had the discipline to stay invested through market cycles, product launches, patent expirations, and even a global pandemic. Below we examine how that hypothetical investment would have worked out over a 20-year period, assuming dividends were reinvested throughout.
| Start date: | 03/27/2006 |
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| End date: | 03/26/2026 | ||||
| Start price/share: | $24.49 | ||||
| End price/share: | $27.57 | ||||
| Starting shares: | 408.33 | ||||
| Ending shares: | 966.25 | ||||
| Dividends reinvested/share: | $24.08 | ||||
| Total return: | 166.39% | ||||
| Average annual return: | 5.02% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,644.96 | ||||
As shown above, the two-decade investment result worked out positively, with an annualized rate of return of 5.02%. This would have turned a $10K investment made 20 years ago into $26,644.96 today (as of 03/26/2026). On a total return basis, that is a result of 166.39%.
For context, over long horizons U.S. equities have historically produced nominal annualized returns in the mid- to high-single digits. A 5.02% annualized outcome therefore represents a moderate but not exceptional equity return — reflecting both Pfizer’s resilience as an established pharmaceutical franchise and the valuation and patent-cycle headwinds that have periodically weighed on the stock.
Total return in this case was driven far more by income than by price appreciation. Over the 20-year period, the share price increased from $24.49 to $27.57 — a relatively modest gain considering the time horizon. The bulk of the return came from dividends that were paid and systematically reinvested, allowing the investor’s share count to grow from 408.33 to 966.25 shares.
Dividends are always an important investment factor to consider, and Pfizer Inc has paid $24.08/share in dividends to shareholders over the past 20 years we looked at above. Many investors will only invest in stocks that pay dividends, so this component of total return is always a crucial consideration. Automated reinvestment of dividends into additional shares of stock can be a powerful way for an investor to compound returns over time. The above calculations are done with the assumption that dividends received over time are reinvested (the calculations use the closing price on ex-date). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividend investors often focus on the stability and growth of a company’s payout. Pfizer has long positioned itself as an income-oriented large-cap pharmaceutical name, and over this period it continued to return a significant portion of cash flows to shareholders via regular dividends, even as it managed patent expirations, portfolio rationalizations, and acquisitions. That consistency is visible in the cumulative $24.08/share of reinvested dividends over the period — roughly equivalent to the original share price itself.
Based upon the most recent annualized dividend rate of 1.72/share, we calculate that PFE has a current yield of approximately 6.24%. Another useful datapoint for long-term holders is “yield on cost” — in other words, we can express the current annualized dividend of 1.72 against the original $24.49/share purchase price. This works out to a yield on cost of 25.48%. In practical terms, an investor who bought in 2006 at $24.49 is now, on an annual basis, receiving dividends that amount to roughly one-quarter of that original outlay each year, before considering any future dividend changes.
Of course, these figures are the result of a specific set of assumptions: dividends are reinvested in full, no additional capital is contributed or withdrawn, and taxes, transaction costs, and any individual investor circumstances are ignored. Real-world outcomes will vary depending on when investors buy or sell, whether they choose to reinvest or take dividends in cash, and their applicable tax regime.
Looking ahead, investors considering PFE for the next 10 to 20 years will likely focus on several key questions: the sustainability of its current dividend policy, the productivity of its research and development pipeline, the trajectory of earnings as COVID-19-related revenues normalize, and valuation relative to large-cap pharmaceutical peers. While past performance does not guarantee future results, the 20-year history illustrated here highlights how a combination of time, reinvested dividends, and staying invested through volatility can shape long-run outcomes.
One more investment quote to leave you with:
“Money is better than poverty, if only for financial reasons.” — Woody Allen
