“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 can reveal much more about an investment than short-term price swings. In the case of CVS Health Corporation (NYSE: CVS), a hypothetical $10,000 investment made in July 2021 produced a solid total return by July 2026, with dividends providing a meaningful share of the outcome alongside capital appreciation.
Using a dividend-reinvestment framework, the investment grew to $15,492.06 over the period. That result reflects both the change in the CVS stock price and the compounding effect of reinvested cash distributions. For long-term shareholders, this is the more complete way to evaluate performance than price change alone.
CVS 5-Year Return Summary
| Start date: | 07/20/2021 |
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| End date: | 07/17/2026 | ||||
| Start price/share: | $81.80 | ||||
| End price/share: | $107.47 | ||||
| Starting shares: | 122.25 | ||||
| Ending shares: | 144.18 | ||||
| Dividends reinvested/share: | $12.27 | ||||
| Total return: | 54.95% | ||||
| Average annual return: | 9.16% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,492.06 | ||||
A $10,000 position established on 07/20/2021 would therefore have increased by $5,492.06 by 07/17/2026, assuming dividends were reinvested. On an annualized basis, the return comes to 9.16%. That is a respectable outcome over a five-year window, particularly because the result was not driven solely by multiple expansion or short-term momentum.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
How Dividends Contributed to CVS Total Return
Dividends played an important role in the five-year result. Over the period, CVS Health Corporation paid $12.27 per share in dividends, and the return calculation assumes those payments were reinvested into additional shares. That reinvestment lifted the share count from 122.25 to 144.18, illustrating how compounding can enhance long-term returns even when the starting dividend yield is moderate rather than exceptionally high.
This distinction matters. Looking only at the stock price, CVS rose from $81.80 to $107.47, a gain of about 31.4%. The total return was materially higher at 54.95% because the cash distributions were put back to work over time. For income-oriented equities, that gap between price return and total return is often one of the most important elements in performance analysis.
Current Dividend Yield and Yield on Cost
Based on the most recent annualized dividend rate of $2.66 per share, CVS currently yields approximately 2.48%. Using the original purchase price of $81.80, that same dividend rate implies a yield on cost of about 3.25%.
Yield on cost is a straightforward but useful measure:
- Current dividend yield compares the annual dividend with the current share price.
- Yield on cost compares the annual dividend with the original purchase price.
- For long-term holders, yield on cost shows how a growing or sustained dividend stream relates to the capital initially committed.
It is worth noting that yield on cost is best used as a historical reference point rather than a valuation tool. It helps illustrate the income profile of an existing holding, but it does not indicate whether the stock is attractive at today’s price.
What This CVS Investment Example Shows
The CVS example underscores three practical points about long-term stock returns:
- Time horizon matters. Five years is long enough for operating performance, capital allocation, and dividend policy to influence results more meaningfully than short-term sentiment.
- Total return matters more than price return alone. Reinvested dividends can account for a substantial portion of shareholder gains.
- Moderate, steady compounding can produce meaningful absolute gains. Turning $10,000 into more than $15,000 over five years does not require extraordinary annual returns.
For CVS specifically, the period demonstrates the value of evaluating the stock through both an income lens and a total-return lens. The combination of share-price appreciation and dividend reinvestment produced a stronger result than either factor would suggest in isolation.
“Wide diversification is only required when investors do not understand what they are doing.” — Warren Buffett
