“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into DTE Energy Co (NYSE: DTE)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 06/14/1999 |
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| End date: | 06/12/2019 | ||||
| Start price/share: | $43.12 | ||||
| End price/share: | $129.15 | ||||
| Starting shares: | 231.88 | ||||
| Ending shares: | 571.86 | ||||
| Dividends reinvested/share: | $48.33 | ||||
| Total return: | 638.56% | ||||
| Average annual return: | 10.51% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $73,856.43 | ||||
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 10.51%. This would have turned a $10K investment made 20 years ago into $73,856.43 today (as of 06/12/2019). On a total return basis, that’s a result of 638.56% (something to think about: how might DTE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DTE Energy Co paid investors a total of $48.33/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 3.78/share, we calculate that DTE has a current yield of approximately 2.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.78 against the original $43.12/share purchase price. This works out to a yield on cost of 6.79%.
Another great investment quote to think about:
“When the public is most frightened, only the strong are left, and that’s when the market is in the best possible hands.” — Victor Niederhoffer
