“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year holding period offers a useful test of whether a stock has delivered durable shareholder value through both price appreciation and dividends. For investors reviewing long-term pharmaceutical equities, Merck & Co Inc (NYSE: MRK) provides a clear example of how total return can differ meaningfully from price return alone.
Looking back to a purchase made on 07/16/2021, a hypothetical $10,000 investment in MRK would have grown to $18,514.20 by 07/15/2026, assuming dividends were reinvested. That equates to a total return of 85.12% and an average annual return of 13.11%.
MRK 5-Year Return Details
| Start date: | 07/16/2021 |
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| End date: | 07/15/2026 | ||||
| Start price/share: | $78.02 | ||||
| End price/share: | $123.61 | ||||
| Starting shares: | 128.17 | ||||
| Ending shares: | 149.76 | ||||
| Dividends reinvested/share: | $15.20 | ||||
| Total return: | 85.12% | ||||
| Average annual return: | 13.11% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,514.20 | ||||
The result is notable for two reasons. First, MRK generated solid capital appreciation, with the share price rising from $78.02 to $123.61 over the period. Second, the reinvestment of dividends increased the share count from 128.17 to 149.76, adding a meaningful compounding effect to the overall outcome. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
What Drove the Total Return?
For dividend-paying equities, total return reflects more than the change in the stock price. In this case, Merck’s five-year return came from three distinct components:
- Share price appreciation from $78.02 to $123.61
- Cash dividends totaling $15.20 per share over the holding period
- Additional share accumulation through dividend reinvestment
This distinction matters. A stock can produce a respectable investment result even when part of the return comes from income rather than solely from valuation expansion. For mature pharmaceutical companies, that combination of earnings durability, dividend support, and moderate price appreciation is often central to the investment case.
Merck Dividends and Yield on Cost
Dividends played a material role in this investment outcome. Over the five-year period shown above, Merck & Co Inc paid $15.20 per share in dividends, all of which are assumed to have been reinvested at the closing price on each ex-dividend date. That assumption is important because it captures the incremental share growth that drives compounding in a dividend reinvestment framework.
Based on the most recent annualized dividend rate of $3.40 per share, MRK has a current yield of approximately 2.75%. Another useful metric is yield on cost, which compares the current annualized dividend to the original purchase price of $78.02 per share. On that basis, the yield on cost is about 3.52%.
In practical terms, yield on cost helps illustrate how a growing or sustained dividend stream can become more attractive over time for long-term holders, even if the market yield available to new buyers changes with the stock price.
Key Takeaways From This 2021 Merck Investment
- A $10,000 investment in MRK on 07/16/2021 grew to $18,514.20 by 07/15/2026.
- The five-year total return was 85.12%.
- The average annual return was 13.11%.
- Dividend reinvestment increased the share count from 128.17 to 149.76.
- Merck’s dividend contributed materially to the overall result, not just the stock’s price gain.
Why the Five-Year View Matters
A five-year retrospective does not predict the next five years, but it does show how the economics of a business and its capital return policy can translate into shareholder returns over a full market cycle. For a company such as Merck, where dividends are a recurring part of the equity story, evaluating total return rather than price performance alone provides a more complete picture.
That is especially relevant when reviewing large-cap pharmaceutical stocks, where product cycles, patent exposure, research execution, and capital allocation all influence long-term performance. A backward look at MRK’s five-year return shows that investors were rewarded by both market appreciation and disciplined dividend income.
Before you go, one additional perspective on income-oriented investing is worth noting:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
