Photo credit: commons.wikimedia.org

“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into CMS Energy Corp (NYSE: CMS)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 08/16/1999
$10,000

08/16/1999
$30,664

08/14/2019
End date: 08/14/2019
Start price/share: $36.69
End price/share: $59.77
Starting shares: 272.57
Ending shares: 513.03
Dividends reinvested/share: $16.67
Total return: 206.64%
Average annual return: 5.76%
Starting investment: $10,000.00
Ending investment: $30,664.00

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 5.76%. This would have turned a $10K investment made 20 years ago into $30,664.00 today (as of 08/14/2019). On a total return basis, that’s a result of 206.64% (something to think about: how might CMS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that CMS Energy Corp paid investors a total of $16.67/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 1.53/share, we calculate that CMS has a current yield of approximately 2.56%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.53 against the original $36.69/share purchase price. This works out to a yield on cost of 6.98%.

One more investment quote to leave you with:
“Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.” — Warren Buffett