“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 calls for a long-term investment horizon, where a five-year holding period, or even longer, fits squarely within the strategy. Rather than attempting to trade around short-term headlines, the focus is on owning high-quality businesses that can compound capital over time.
STERIS plc (NYSE: STE) is one such business that investors often categorize as a defensive, healthcare-oriented compounder. The company provides infection prevention, decontamination, and surgical products and services to hospitals, pharmaceutical manufacturers, and other healthcare facilities. Its revenue base is diversified across capital equipment, consumables, and service contracts, which together tend to generate relatively resilient cash flows through economic cycles.
How would a Buffett-style, five-year buy-and-hold strategy have worked out for an investment in STE made in 2021? Below, we examine the outcome for a hypothetical 10000 investment initiated in March 2021 and held through March 2026, with dividends reinvested.
| Start date: | 03/17/2021 |
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| End date: | 03/16/2026 | ||||
| Start price/share: | $187.01 | ||||
| End price/share: | $219.05 | ||||
| Starting shares: | 53.47 | ||||
| Ending shares: | 55.89 | ||||
| Dividends reinvested/share: | $9.62 | ||||
| Total return: | 22.42% | ||||
| Average annual return: | 4.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,242.76 | ||||
As shown above, the five-year investment result worked out as follows, with an annualized rate of return of 4.13% and a total return of 22.42% on a dividend-reinvested basis. That performance would have turned a 10000 investment made five years ago into $12,242.76 today (as of 03/16/2026), based on the assumptions in the table.
In dollar terms, the gain of approximately $2,242.76 consists of two key components:
- Capital appreciation, as the share price increased from $187.01 to $219.05.
- Dividend income, with $9.62 per share paid out over the period and reinvested into additional STE shares.
Importantly, this hypothetical investment period included an environment of higher interest rates, inflation concerns, and periodic volatility in healthcare and medtech equities. Against that backdrop, a positive, mid-single-digit annualized return illustrates the potential role of a defensive healthcare holding in a diversified portfolio, even when returns fall short of more aggressive growth sectors.
On a total return basis, 22.42% over five years also compares with the performance of broad equity benchmarks. While exact index returns will depend on the measurement dates and methodology, large-cap U.S. equities over similar periods have often produced higher average annual returns, reflecting the strength of growth and technology names. That context underscores that even quality, lower-volatility healthcare compounders can lag the broader market in certain cycles.
[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 five years, STERIS plc has paid $9.62 per 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.
Reinvestment matters because:
- Each dividend payment buys a fraction of an additional share.
- Those additional shares then generate their own dividends in subsequent quarters.
- Over longer time horizons, this “compounding on compounding” effect can meaningfully increase total return, particularly for companies that combine steady dividend growth with underlying earnings expansion.
Based upon the most recent annualized dividend rate of $2.52 per share, we calculate that STE has a current yield of approximately 1.15%. Another interesting datapoint we can examine is “yield on cost” — in other words, we can express the current annualized dividend of $2.52 against the original $187.01 per share purchase price. This works out to a yield on cost of 0.61%.
While a sub-1% yield on cost over a five-year span may appear modest, income investors will typically also consider the company’s pace of dividend growth. STERIS has raised its dividend regularly over time, supported by recurring revenue from consumables and services as well as its installed base of sterilization and surgical equipment. Historically, that dividend growth, in combination with earnings growth, has been an important contributor to the investment case for STE as a long-duration healthcare compounder.
Looking ahead, future returns for STE shareholders will depend on several factors, including:
- Growth in procedure volumes and capacity expansion at hospitals and ambulatory surgical centers.
- Demand from pharmaceutical and biotechnology manufacturers for sterile processing and decontamination solutions.
- Integration and performance of past acquisitions, which have been a meaningful part of STERIS’s growth strategy.
- Valuation levels relative to the broader healthcare equipment and services sector.
- The company’s ongoing ability to translate revenue growth into free cash flow that can fund dividends, share repurchases, and debt reduction.
For investors applying a Buffett-style, multi-year horizon, the key questions are less about quarterly earnings variability and more about whether STERIS can extend its competitive advantages, maintain strong customer relationships, and continue to allocate capital prudently across organic investment, acquisitions, and shareholder returns.
Here’s one more investment quote to consider before you go:
“Our job is to find a few intelligent things to do, not to keep up with every damn thing in the world.” — Charlie Munger
