“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Applied Materials, Inc. (NASD: AMAT) back in 2020, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 02/27/2020 |
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| End date: | 02/26/2025 | ||||
| Start price/share: | $57.00 | ||||
| End price/share: | $168.51 | ||||
| Starting shares: | 175.44 | ||||
| Ending shares: | 183.62 | ||||
| Dividends reinvested/share: | $5.76 | ||||
| Total return: | 209.42% | ||||
| Average annual return: | 25.33% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $30,941.68 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 25.33%. This would have turned a $10K investment made 5 years ago into $30,941.68 today (as of 02/26/2025). On a total return basis, that’s a result of 209.42% (something to think about: how might AMAT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Applied Materials, Inc. paid investors a total of $5.76/share in dividends over the 5 holding period, marking a second component of the total return beyond share price change alone. Much like watering a tree, reinvesting dividends can help an investment to grow over time — for the above calculations we assume dividend reinvestment (and for this exercise the closing price on ex-date is used for the reinvestment of a given dividend).
Based upon the most recent annualized dividend rate of 1.6/share, we calculate that AMAT has a current yield of approximately 0.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.6 against the original $57.00/share purchase price. This works out to a yield on cost of 1.67%.
Another great investment quote to think about:
“The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” — Benjamin Graham
