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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a twenty year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Dominion Energy Inc (NYSE: D) back in 1999. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 06/28/1999


End date: 06/27/2019
Start price/share: $22.22
End price/share: $76.72
Starting shares: 450.05
Ending shares: 1,027.63
Dividends reinvested/share: $38.59
Total return: 688.40%
Average annual return: 10.87%
Starting investment: $10,000.00
Ending investment: $78,844.62

The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 10.87%. This would have turned a $10K investment made 20 years ago into $78,844.62 today (as of 06/27/2019). On a total return basis, that’s a result of 688.40% (something to think about: how might D shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Dominion Energy Inc paid investors a total of $38.59/share in dividends over the 20 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 3.67/share, we calculate that D has a current yield of approximately 4.78%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.67 against the original $22.22/share purchase price. This works out to a yield on cost of 21.51%.

Here’s one more great investment quote before you go:
“Every day that you’re not selling an asset in your portfolio, you’re choosing to buy it.” — Sam Zell