“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. For many investors, that approach was put to the test over the last half decade in high-growth, pandemic-era winners that later underwent sharp de-ratings.
How would such a strategy have worked out for an investment into PayPal Holdings Inc (NASD: PYPL)? Below, we examine the outcome of a five-year investment into the stock made in March 2021, and place that performance in the context of the company’s fundamentals and the broader payments landscape.
| Start date: | 03/18/2021 |
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| End date: | 03/17/2026 | ||||
| Start price/share: | $238.41 | ||||
| End price/share: | $46.13 | ||||
| Starting shares: | 41.94 | ||||
| Ending shares: | 42.17 | ||||
| Dividends reinvested/share: | $0.28 | ||||
| Total return: | -80.55% | ||||
| Average annual return: | -27.92% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $1,945.69 | ||||
The above analysis shows that this particular five-year investment result worked out poorly for shareholders who bought near the 2021 highs. An annualized rate of return of -27.92% would have turned a $10K investment made five years ago into $1,945.69 today (as of 03/17/2026). On a total return basis, that is a loss of -80.55% — a stark reminder that not all long-term holdings reward patience when the starting valuation is demanding.
These figures include the impact of dividend income. Beyond share price change, another component of PYPL’s total return over this period has been the payment by PayPal Holdings Inc of $0.28/share in dividends to shareholders, following the company’s decision in late 2023 to initiate a recurring cash dividend. That step marked a notable shift in capital allocation, signaling PayPal’s transition from a pure growth story toward a more mature, cash-generative model alongside continued share repurchases and investment in its platform.
Automatic reinvestment of dividends can be a powerful way to compound returns over long periods. For the above calculations, we presume that dividends are reinvested into additional shares of stock through a dividend reinvestment plan, with fractional shares added accordingly. (For the purpose of these calculations, the closing price on the ex-dividend date is used.) Even so, because the share price declined so sharply from its 2021 level, the modest dividend stream was not nearly enough to offset capital losses over this particular five-year window.
Based upon the most recent annualized dividend rate of .56/share, we calculate that PYPL has a current yield of approximately 1.21%. For investors who bought near $46, that yield is broadly competitive with other large-cap payment networks that offer small but growing dividends. For investors who purchased at $238.41/share in March 2021, however, the picture is quite different. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .56 against the original $238.41/share purchase price. This works out to a yield on cost of 0.51%, underscoring how a high entry price can keep income yields structurally low for many years.
The underlying business performance over the last five years has been more resilient than the share price might suggest. PayPal has continued to process rising volumes of digital payments, maintained a large global active user base and generated substantial free cash flow. However, a combination of factors weighed on the stock, including:
- Multiple compression as investors rotated out of high-growth, high-multiple technology names following the 2020-2021 pandemic boom.
- Slower growth in active accounts as management prioritized engagement and profitability over headline user additions.
- Intensifying competition in online payments from card networks, buy-now-pay-later providers, large banks and big technology platforms.
- Higher interest rates, which raised discount rates applied to future earnings and pressured valuations across long-duration growth assets.
For disciplined, long-term investors, the PYPL experience from 2021 to 2026 illustrates several core lessons. First, time horizon alone does not guarantee positive outcomes; the price paid and the prevailing market narrative at entry matter significantly. Second, even high-quality franchises can see their shares correct sharply when expectations and valuation overshoot business fundamentals. Third, a newly initiated dividend — while often a positive sign of balance sheet strength and earnings durability — may not materially change the risk/return profile for investors who bought at peak enthusiasm.
At the same time, the ending valuation after a prolonged drawdown may look very different from the starting point. After an -80.55% total-return drawdown from the March 2021 entry shown here, future returns will be driven by PayPal’s ability to stabilize margins, reignite sustainable growth in total payment volume and continue returning capital to shareholders through dividends and buybacks. For investors assessing the stock today, the key question becomes not what has happened over the last five years, but whether the market is now over- or underestimating PayPal’s long-term earnings power.
As always, past performance does not guarantee future results, and a single entry date provides only a narrow lens on an investment’s overall risk and reward profile. Dollar-cost averaging, diversification across sectors and styles, and continual reassessment of a company’s fundamentals relative to its valuation remain central to implementing the kind of disciplined long-term approach championed by Buffett and many other veteran investors.
The calculations above were computed with the Dividend Channel DRIP Returns Calculator, which assumes dividend reinvestment and does not take into account any taxes, fees, or transaction costs that individual investors may incur.
One more piece of investment wisdom to leave you with:
“When everyone is going right, look left.” — Sam Zell
