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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 Quanta Services, Inc. (NYSE: PWR)? Today, we examine the outcome of a five year investment into the stock back in 2014.

Start date: 07/01/2014


End date: 06/28/2019
Start price/share: $35.11
End price/share: $38.19
Starting shares: 284.82
Ending shares: 285.79
Dividends reinvested/share: $0.12
Total return: 9.14%
Average annual return: 1.77%
Starting investment: $10,000.00
Ending investment: $10,915.84

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 1.77%. This would have turned a $10K investment made 5 years ago into $10,915.84 today (as of 06/28/2019). On a total return basis, that’s a result of 9.14% (something to think about: how might PWR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Quanta Services, Inc. paid investors a total of $0.12/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 .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 $35.11/share purchase price. This works out to a yield on cost of 1.20%.

More investment wisdom to ponder:
“Spend each day trying to be a little wiser than you were when you woke up.” — Charlie Munger