Pfizer: A Buy-and-Hold Success Story

Suppose you had invested $1,000 in Pfizer (PFE), the huge pharmaceutical company, on March 11, 1994. What are your returns as of March 12, 2004, a 10-year holding period?

Since your purchase of 17.316 shares at $57.75 per share, PFE has split two for one twice and three for one once so you now own 207.7922 shares. Their value as of March 12, 2004 is $7,322.99 (207.7922*$35.29), a 22.05% annualized return.

PFE has regularly increased dividends since 1994 so you have been paid $669.74 ($40.41 per share) in dividends. Therefore, you've recouped about two thirds of your original investment. At the current dividend rate ($0.68 per share) you'll recoup your original $1,000 investment in about two more years.

Your current dividend yield is 14.17% (current dividend/purchase price adjusted for three stocks splits, = $0.68/$4.7975). So your original $1,000 investment is paying you more than a 14% annual return. Try to find another investment to beat that.

What if you had reinvested all your dividends instead of receiving the cash dividends? On March 12, 2004 you would own 240.36 shares of PFE. At $35.29 per share the total value is $8,482.28, which is $489.64 more than the combined value of $7,322.99 plus $669.74.

What do all these numbers mean? The answer is simple - rising dividends and an appreciating stock price combine to make a very powerful argument for buying and holding a well-managed company.