“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 can be a useful test of whether a high-yield equity delivered meaningful long-term value. For Verizon Communications Inc (NYSE: VZ), the answer depends heavily on whether dividends were reinvested. While the stock price declined over the period, Verizon’s substantial cash distributions helped offset that weakness and produced a positive total return.
Using a start date of 06/02/2021 and an end date of 06/01/2026, a $10,000 investment in Verizon stock grew to $11,508.57 with dividends reinvested. That equates to a total return of 15.07%, or an average annual return of 2.85%.
VZ 5-Year Return Details
| Start date: | 06/02/2021 |
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| End date: | 06/01/2026 | ||||
| Start price/share: | $56.65 | ||||
| End price/share: | $47.73 | ||||
| Starting shares: | 176.52 | ||||
| Ending shares: | 241.09 | ||||
| Dividends reinvested/share: | $13.26 | ||||
| Total return: | 15.07% | ||||
| Average annual return: | 2.85% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,508.57 | ||||
The key point is straightforward: Verizon stock produced a positive total return over the five-year period, but that outcome came despite capital depreciation rather than because of price appreciation. The share price fell from $56.65 to $47.73, so the investment result was driven primarily by dividend income and the compounding effect of reinvestment.
In other words, this was a classic example of the distinction between price return and total return. Looking only at the stock chart would understate what a long-term holder actually earned. Looking only at the dividend yield would overstate the strength of the investment if the underlying equity value is weakening. Both matter.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
How Dividend Reinvestment Changed the Result
Over the past five years, Verizon Communications Inc paid $13.26 per share in dividends. In this analysis, each dividend is assumed to be reinvested into additional shares at the closing price on the ex-dividend date. That process increased the position from 176.52 shares at the outset to 241.09 shares by the end of the period.
That increase in share count is central to the final result. Reinvestment allowed income generated by the original position to purchase more shares over time, which then generated their own dividends. For a slower-growth, income-oriented stock such as Verizon, this compounding effect can account for a substantial portion of long-term returns.
- Initial investment: $10,000
- Ending value: $11,508.57
- Total return: 15.07%
- Average annual return: 2.85%
- Primary return driver: dividends and dividend reinvestment
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $2.83 per share, VZ has a current yield of approximately 5.93% using the $47.73 ending share price in this review. That is the market yield available to a new buyer at that price.
A separate measure is yield on cost, which compares the current annualized dividend to the original purchase price. Using the $56.65 starting price, the current annualized dividend of $2.83 implies a yield on cost of 4.99%.
Yield on cost can be useful for illustrating how an income stream relates to an investor’s original entry price, but it should not be confused with current yield. The market values the stock based on today’s price, operating outlook, balance sheet considerations, and expected future cash flows, not on an earlier cost basis.
What the Five-Year Verizon Return Suggests
Verizon’s five-year performance underscores a broader point about mature telecom equities. These companies are often evaluated less on rapid earnings expansion and more on income generation, capital intensity, leverage, pricing discipline, and the durability of free cash flow. A high dividend can support returns, but it does not fully insulate investors from weak share-price performance.
For that reason, assessing Verizon stock over the next five years is likely to hinge on several recurring variables:
- Dividend sustainability relative to cash generation
- Wireless subscriber trends and competitive pricing pressure
- Capital spending needs, including network investment
- Debt management and interest expense
- Whether valuation already reflects slower growth expectations
Those factors help explain why total return analysis is more informative than focusing on dividend yield alone. In Verizon’s case, the past five years delivered a modest positive result, but one that depended materially on disciplined reinvestment rather than stock-price momentum.
More investment wisdom to ponder:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
