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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
A critical pearl of wisdom from Warren Buffett teaches us that with any potential stock investment we may make, as soon as our buy order is filled we have a choice: to remain a co-owner of that company for the long haul, or to react to the inevitable short-term ups and downs that the stock market is famous for (sometimes sharp ups and downs).
The reality of this choice forces us to challenge our conviction in any given company we might invest in, and to keep our eyes on a genuinely long-term time horizon. The market may go up and down in the interim, but over a twenty-year holding period, will the investment succeed on a risk-adjusted basis and relative to alternatives?
Back in 2006, investors may have been asking themselves that very question about McKesson Corp (NYSE: MCK). At the time, McKesson was already a major player in pharmaceutical distribution, operating in a structurally important but relatively low-margin segment of the health care ecosystem. The business was not a fast-growing technology story, but a scale-driven operator in an essential industry, with cash flows tied to long-term trends such as aging demographics, rising prescription volumes, and the increasing complexity of drug supply chains.
Let’s examine what would have happened over a twenty-year holding period, had you invested in MCK shares back in 2006 and simply held on through multiple market cycles, including the 2008–2009 financial crisis, the 2020 pandemic-driven downturn, and subsequent recoveries.
| Start date: | 04/03/2006 |
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| End date: | 03/31/2026 | ||||
| Start price/share: | $52.57 | ||||
| End price/share: | $865.36 | ||||
| Starting shares: | 190.22 | ||||
| Ending shares: | 221.32 | ||||
| Dividends reinvested/share: | $26.18 | ||||
| Total return: | 1,815.22% | ||||
| Average annual return: | 15.90% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $191,434.35 | ||||
As shown above, the twenty-year investment result worked out exceptionally well, with an annualized rate of return of 15.90%. This would have turned a $10K investment made 20 years ago into $191,434.35 today (as of 03/31/2026). On a total return basis, that is a result of 1,815.22%.
Putting that in context, a 15.90% compound annual growth rate over two decades meaningfully exceeds the long-run historical total return of broad U.S. equity indices, which has typically been in the high single-digit range. For an investor focused on compounding capital over a working lifetime, the difference between an 8% and a nearly 16% annualized return is profound. At 8%, $10,000 compounds to roughly $46,600 over 20 years. At 15.90%, the same initial stake compounds to more than four times that amount.
Of course, this is a backward-looking illustration and does not guarantee future results, but it underscores the power of patience when combined with a strong underlying business.
The Role Of Dividends And Reinvestment
Notice that McKesson Corp paid investors a total of $26.18/share in dividends over the 20-year 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 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).
Reinvestment had two important effects:
- It increased the share count from 190.22 to 221.32, so that by 2026 the investor owned roughly 16% more shares than at the outset, without deploying additional capital.
- It amplified the dollar value of the position, because each additional share participated fully in subsequent price appreciation.
For income-focused investors, it is worth noting that McKesson has historically been a relatively low-yielding stock but has built a track record of consistent dividend increases over time. Even when a company’s current yield appears modest, persistent dividend growth combined with price appreciation can still produce attractive total returns.
Current Yield Versus Yield On Cost
Based upon the most recent annualized dividend rate of 3.28/share, we calculate that MCK has a current yield of approximately 0.38%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.28 against the original $52.57/share purchase price. This works out to a yield on cost of 0.72%.
Yield on cost is sometimes used by long-term investors to illustrate how the income stream from an investment has evolved relative to the original outlay. However, from a portfolio-management perspective, what ultimately matters for capital-allocation decisions is the current yield and the expected rate of future dividend growth, not the historical purchase price.
McKesson’s relatively low current yield reflects its capital-allocation priorities over the last two decades. The company has tended to emphasize share repurchases and targeted acquisitions alongside a steadily rising, but conservative, dividend. For total return investors, that mix has historically been effective: reducing share count through buybacks can support earnings per share growth, which in turn can drive share price performance.
What Drove McKesson’s Long-Term Performance?
The numbers above do not exist in a vacuum. Several fundamental themes helped support McKesson’s long-term trajectory over the 2006‑2026 period:
- Defensive end-market exposure. As a major pharmaceutical distributor, McKesson benefited from relatively resilient prescription demand across economic cycles. Health care spending in developed markets tends to grow over time, supported by demographics and innovation, even in periods of macroeconomic stress.
- Scale and purchasing power. Distribution is a volume-driven, low-margin business. McKesson’s scale, logistics infrastructure, and relationships with manufacturers and providers have historically provided competitive advantages and helped sustain cash generation.
- Strategic evolution. Over the past two decades, McKesson has refined its portfolio, exited certain lower-return activities, and invested in technology, specialty distribution, and services to better align with changing health care models.
- Capital discipline. Share repurchases, measured acquisitions, and a growing (if modest) dividend have all contributed to per-share value creation.
These factors combined to allow patient shareholders to benefit from both earnings growth and multiple expansion over time. That said, the journey was not linear. The stock experienced periods of volatility tied to regulatory developments, reimbursement pressures, and broader market sell-offs. Long-term investors had to tolerate drawdowns along the way in order to realize the full benefit of compounding.
Lessons For Long-Term Investors
Looking back, the McKesson example illustrates several broader principles:
- Time in the market can be more important than timing the market. An investor who simply held through crises and sector-specific concerns ultimately benefited from the company’s fundamental strengths.
- Total return matters more than headline yield. McKesson never offered a high current yield, yet its combination of price appreciation, dividend growth, and reinvestment produced robust results.
- Business quality and industry structure are crucial. Durable demand, scale advantages, and disciplined capital allocation can compound value over long periods, even in mature industries.
- Patience must be paired with ongoing analysis. A buy-and-hold approach works best when investors periodically reassess the investment thesis, competitive landscape, and balance sheet strength, rather than relying solely on past performance.
For today’s investors, the natural follow-on question is how McKesson shares might perform over the next 20 years. While no one can forecast future returns with precision, the historical record suggests that identifying high-quality businesses in structurally important industries, and holding them through multiple cycles, can be a powerful strategy when aligned with a thoughtful financial plan and risk tolerance.
The illustration above is based on historical market data and the assumptions embedded in the Dividend Channel DRIP Returns Calculator. Actual investor experience can vary based on trading costs, taxes, and timing differences.
Discipline, Not Just Outperformance
One more piece of investment wisdom to leave you with:
“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
For many investors, case studies such as McKesson’s are useful not only as examples of what has worked in the past, but also as reminders that compounding requires both sound analysis at the outset and the emotional resilience to stay with a well-founded strategy amid inevitable volatility.
