“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year holding period offers a useful test of how a business and its shares have compounded over time. For Microsoft stock, that period captures not only price appreciation, but also the contribution of dividends and dividend reinvestment to total return. Looking back from June 2021 to June 2026, a $10,000 investment in Microsoft Corporation (NASD: MSFT) grew into $14,369.65, assuming dividends were reinvested.
That result translates to a total return of 43.70% and an annualized return of 7.52%. While Microsoft is often discussed primarily as a large-cap technology and software platform company, the five-year outcome also shows the role that even a modest dividend can play when reinvested over time.
MSFT 5-Year Return Details
| Start date: | 06/25/2021 |
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| End date: | 06/24/2026 | ||||
| Start price/share: | $265.02 | ||||
| End price/share: | $365.46 | ||||
| Starting shares: | 37.73 | ||||
| Ending shares: | 39.32 | ||||
| Dividends reinvested/share: | $14.81 | ||||
| Total return: | 43.70% | ||||
| Average annual return: | 7.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,369.65 | ||||
In practical terms, Microsoft turned $10,000 into $14,369.65 over the period ending 06/24/2026. That outcome reflects both share price appreciation and the incremental shares accumulated through reinvested dividends. The figures above were computed using the Dividend Channel DRIP Returns Calculator.
What Drove the Return
Microsoft’s five-year return over this period came from two sources:
- Capital appreciation, as the share price rose from $265.02 to $365.46
- Cash dividends, which added to total return and, when reinvested, increased the share count from 37.73 to 39.32
That distinction matters. Price return alone captures only the change in the stock price. Total return incorporates dividends, making it the more complete measure of investment performance for a dividend-paying stock such as Microsoft.
Microsoft Dividends and Reinvestment
Over the five-year period shown above, Microsoft paid a cumulative $14.81 per share in dividends. The company is not generally viewed as a high-yield stock, but its dividend has long been a meaningful component of shareholder return. For long-term holders, reinvestment can modestly but steadily increase share ownership, which in turn raises future dividend receipts and amplifies compounding.
In the calculation above, dividends are assumed to be reinvested at the closing price on the ex-dividend date. That is why the ending share count exceeds the starting share count even though no additional outside capital was added.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $3.64 per share, MSFT has a current yield of approximately 1.00% using the ending share price of $365.46.
Yield on cost answers a different question: what is the current annual dividend relative to the original purchase price? Using the 06/25/2021 entry price of $265.02, Microsoft’s annualized dividend of $3.64 represents a yield on cost of about 1.37%.
This is an important distinction:
- Current yield measures income relative to today’s stock price
- Yield on cost measures income relative to the original purchase price
For companies that raise dividends over time, yield on cost can improve even when the stock’s headline current yield remains modest.
Why the Five-Year View Matters
Looking at Microsoft through a five-year lens helps separate business performance from short-term market swings. Microsoft entered this period as one of the market’s largest software companies, with major businesses spanning productivity software, cloud infrastructure, enterprise platforms, and gaming. Over time, the durability of those franchises, recurring revenue characteristics, and substantial free cash flow have been central to the investment case.
That does not mean returns will be linear or uniform across future periods. A stock can deliver solid business results while producing more muted shareholder returns if starting valuations are elevated, or stronger returns if earnings growth and valuation expansion occur together. The historical result above therefore says more about what happened over one defined holding period than about what must happen next.
Another useful investment principle comes from Charlie Munger:
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Charlie Munger
