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“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
$10,000

07/15/2014
$13,632

07/12/2019
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