“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 provide a clearer view of an equity investment than day-to-day price moves. For Illinois Tool Works, Inc. (NYSE: ITW), the key question is straightforward: what would a 2021 purchase be worth today after accounting for both share-price appreciation and reinvested dividends? Over the period from August 18, 2021 to August 17, 2026, the result was a positive total return, with dividends contributing meaningfully to the outcome.
ITW 5-Year Return Summary
| Start date: | 08/18/2021 |
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| End date: | 08/17/2026 | ||||
| Start price/share: | $229.88 | ||||
| End price/share: | $287.28 | ||||
| Starting shares: | 43.50 | ||||
| Ending shares: | 48.93 | ||||
| Dividends reinvested/share: | $28.16 | ||||
| Total return: | 40.57% | ||||
| Average annual return: | 7.05% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,058.32 | ||||
A $10,000 investment in Illinois Tool Works at the start of the period would have grown to $14,058.32 by August 17, 2026, assuming dividends were reinvested. That equates to a 40.57% cumulative total return and a 7.05% annualized return. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
What Drove the Return
The outcome came from two sources:
- Share-price appreciation: ITW rose from $229.88 to $287.28 per share over the period.
- Dividend income: the company paid a total of $28.16 per share in dividends during the holding period, and those cash distributions were assumed to be reinvested.
This distinction matters. Looking only at the stock price understates the full economics of ownership, particularly for established dividend-paying industrial companies. Reinvestment increased the share count from 43.50 to 48.93 shares, which in turn lifted the ending value of the position.
Why Dividend Reinvestment Matters
Dividend reinvestment compounds returns by converting cash distributions into additional shares. Those extra shares can then generate future dividends of their own. Over shorter periods, the effect may appear modest; over longer periods, it can become a significant share of total return.
In this case, the investment result was not driven by price alone. The steady addition of shares through dividend reinvestment helped improve the ending portfolio value and illustrates why total return is the more complete measure of performance.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $6.88 per share, ITW has a current yield of approximately 2.39% using the ending share price of $287.28.
Yield on cost measures the current annual dividend relative to the original purchase price. Using the same $6.88 annualized dividend and the August 2021 entry price of $229.88, yield on cost works out to about 2.99%. That is a useful way to frame how an investor’s income stream evolves over time as the dividend rises, even though the market yield available to a new buyer is based on the current share price.
What the 5-Year ITW Return Suggests
The five-year Illinois Tool Works investment outcome highlights a familiar pattern in high-quality industrial equities: returns often build through a combination of moderate capital appreciation, regular dividend payments, and disciplined reinvestment. It also shows that a satisfactory long-term result does not require uninterrupted price gains. What matters more is the business’s capacity to keep generating cash, supporting dividends, and compounding shareholder value across a full cycle.
For investors reviewing ITW’s historical performance, the main takeaway is that the stock’s total return over this period was materially stronger than its price return alone. That is the practical value of measuring dividend stocks on a total return basis rather than through share-price movement in isolation.
Here’s one more investment quote before you go:
“If you’re looking for a home run, a great investment for five years or 10 years or more, then the only way to beat this enormous fog that covers the future is to identify a long-term trend that will give a particular business some sort of edge.” — Ralph Wanger
