“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 quote above is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a five year period, and how will that translate into shareholder returns?
Today, we look backwards in time to 2021, and examine what happened to investors who asked that very question about PACCAR Inc. (NASD: PCAR), by taking a detailed look at the investment outcome over a five year holding period.
| Start date: | 04/07/2021 |
|
|||
| End date: | 04/06/2026 | ||||
| Start price/share: | $61.65 | ||||
| End price/share: | $118.32 | ||||
| Starting shares: | 162.21 | ||||
| Ending shares: | 195.24 | ||||
| Dividends reinvested/share: | $15.93 | ||||
| Total return: | 131.01% | ||||
| Average annual return: | 18.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,101.41 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 18.23%. This would have turned a $10K investment made five years ago into $23,101.41 today (as of 04/06/2026). On a total return basis, that is a gain of 131.01%.
The return profile is notable when viewed against broad equity benchmarks. Over the same April 2021 to April 2026 period, the S&P 500 Index delivered a substantially lower annualized total return, and most traditional U.S. large-cap value indices also lagged the 18.23% figure cited above. While index-level comparisons vary depending on the exact start and end dates used, PCAR’s performance over this window would be considered strong in a diversified equity portfolio context.
Of course, past performance does not guarantee future results. Nonetheless, the numbers provide a concrete illustration of what a disciplined, five-year holding period in a high-quality industrial business can deliver. It raises a natural question for long-term investors: how might PCAR shares perform over the next five years, given the company’s current fundamentals and industry backdrop?
Dividends And The Power Of Reinvestment
Many investors refuse to own any stock that lacks a dividend; in the case of PACCAR Inc., investors have received $15.93/share in dividends over the five years examined in the exercise above. This means total return was driven not just by share price appreciation, but also by the dividends received (and what the investor did with those dividends).
For this exercise, the assumption is that dividends were reinvested — i.e., used to purchase additional shares of PCAR. That reinvestment is what allowed the starting position of 162.21 shares to grow to 195.24 shares by 04/06/2026. The calculations use the closing price on the ex-dividend date to determine how many fractional shares are purchased each time a dividend is paid.
Based upon the most recent annualized dividend rate of $1.32/share, we calculate that PCAR has a current yield of approximately 1.12%. While that headline yield may not appear high relative to some high-income sectors, the company has a multi-decade record of returning capital through a combination of regular quarterly dividends and special dividends when earnings and cash flow conditions allow. Historically, those special distributions have been an important component of total cash returned to shareholders.
Another interesting datapoint we can examine is “yield on cost” — in other words, we can express the current annualized dividend of $1.32 against the original $61.65/share purchase price. This works out to a yield on cost of 1.82%. If the regular dividend continues to grow over time, the yield on cost for a 2021 investor could increase meaningfully over the coming decade, even if the prevailing market yield on the stock remains in line with historical norms.
What Is Behind The Numbers At PACCAR?
PACCAR is a leading global manufacturer of commercial vehicles, producing premium light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF brands. The company also operates a large parts business and provides financial services such as dealer and customer financing and leasing.
From 2021 through 2025, PACCAR navigated a complex operating environment that included supply-chain disruptions, a post-pandemic recovery in freight activity, and tightening and then easing monetary policy. Against that backdrop, the company benefited from:
- Robust demand for replacement and expansion of truck fleets, particularly in North America and Europe.
- Improved pricing and a richer sales mix, supporting margins on new truck sales.
- Growth in the higher-margin aftermarket parts business as the installed base of vehicles expanded.
- Continued investment in technology, including fuel-efficient powertrains, connected-vehicle services and early-stage electric and zero-emissions platforms, aimed at meeting evolving regulatory and customer requirements.
These trends have contributed to rising revenue and earnings over the period in question, which in turn underpinned the share-price appreciation and the company’s ability to maintain and periodically enhance shareholder distributions.
Risk Considerations For Long-Term Holders
Even with the strong trailing five-year outcome, investors should remain mindful of cyclical and company-specific risks. The heavy-duty truck industry is historically cyclical, with order activity tied to freight volumes, interest rates, fuel costs and general economic conditions. A downturn in freight demand or a recessionary environment can weigh on new truck orders and pressure margins.
In addition, PACCAR faces ongoing capital requirements to meet emissions standards, safety regulations and customer expectations around electrification and autonomous-driving technologies. While the company enters such investment cycles from a position of balance-sheet strength, periods of elevated capital spending can affect near-term free cash flow.
For long-term, “five-year and beyond” investors, these risks highlight why position sizing, diversification and a clear understanding of business cyclicality are central to portfolio construction, even in the case of high-quality industrial franchises.
Framing PCAR In A Long-Horizon Strategy
The PCAR example underscores the interaction between business quality, time horizon and investor behavior:
- Business quality: A globally diversified commercial-vehicle franchise with strong brands and a recurring parts and services stream has been able to compound value over time.
- Time in the market: A five-year holding period allowed short-term volatility and cyclical swings in truck orders to be absorbed, while allowing underlying earnings power to assert itself.
- Dividend discipline: Reinvesting dividends added incremental shares and amplified the gain from the underlying share-price performance.
For investors evaluating potential new positions today, the backward-looking data do not provide a forecast, but they do illustrate how a long-term, fundamentals-based approach, in the spirit of Buffett’s five-year thought experiment, can play out when the underlying business executes well over a cycle.
More investment wisdom to ponder:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks
All return figures referenced above are historical and for illustrative purposes only. They do not reflect the impact of taxes, transaction costs or advisory fees, and they do not guarantee future performance. Investors should conduct their own research or consult a qualified financial professional before making any investment decisions.
