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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Quanta Services, Inc. (NYSE: PWR) back in 2009: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years, here’s how that investment would have turned out.

Start date: 04/01/2009
$10,000

04/01/2009
$17,603

03/29/2019
End date: 03/29/2019
Start price/share: $21.46
End price/share: $37.74
Starting shares: 465.98
Ending shares: 466.60
Dividends reinvested/share: $0.04
Total return: 76.10%
Average annual return: 5.82%
Starting investment: $10,000.00
Ending investment: $17,603.96

As shown above, the ten year investment result worked out well, with an annualized rate of return of 5.82%. This would have turned a $10K investment made 10 years ago into $17,603.96 today (as of 03/29/2019). On a total return basis, that’s a result of 76.10% (something to think about: how might PWR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Quanta Services, Inc. paid investors a total of $0.04/share in dividends over the 10 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 to 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).

Based upon the most recent annualized dividend rate of .16/share, we calculate that PWR has a current yield of approximately 0.42%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .16 against the original $21.46/share purchase price. This works out to a yield on cost of 1.96%.

Here’s one more great investment quote before you go:
“Most investors want to do today what they should have done yesterday.” — Larry Summers