“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Dominion Energy Inc (NYSE: D)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 07/15/2014 |
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| End date: | 07/12/2019 | ||||
| Start price/share: | $69.52 | ||||
| End price/share: | $77.50 | ||||
| Starting shares: | 143.84 | ||||
| Ending shares: | 175.92 | ||||
| Dividends reinvested/share: | $14.80 | ||||
| Total return: | 36.34% | ||||
| Average annual return: | 6.40% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $13,632.03 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 6.40%. This would have turned a $10K investment made 5 years ago into $13,632.03 today (as of 07/12/2019). On a total return basis, that’s a result of 36.34% (something to think about: how might D shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Dominion Energy Inc paid investors a total of $14.80/share in dividends over the 5 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 4.74%. 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 $69.52/share purchase price. This works out to a yield on cost of 6.82%.
Another great investment quote to think about:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
