“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, would fit right into the strategy. How would such a strategy have worked out for an investment into Verizon Communications Inc (NYSE: VZ)? Today, we examine the outcome of a five year investment into the stock back in 2020.
| Start date: | 10/07/2020 |
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| End date: | 10/06/2025 | ||||
| Start price/share: | $59.61 | ||||
| End price/share: | $41.44 | ||||
| Starting shares: | 167.76 | ||||
| Ending shares: | 225.13 | ||||
| Dividends reinvested/share: | $13.06 | ||||
| Total return: | -6.70% | ||||
| Average annual return: | -1.38% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,328.78 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -1.38%. This would have turned a $10K investment made 5 years ago into $9,328.78 today (as of 10/06/2025). On a total return basis, that’s a result of -6.70% (something to think about: how might VZ shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Verizon Communications Inc paid investors a total of $13.06/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 2.76/share, we calculate that VZ has a current yield of approximately 6.66%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.76 against the original $59.61/share purchase price. This works out to a yield on cost of 11.17%.
One more investment quote to leave you with:
“You can’t be a good value investor without being an independent thinker; you’re seeing valuations that the market is not appreciating. But it’s critical that you understand why the market isn’t seeing the value you do.” — Joel Greenblatt
