“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a twenty year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Evergy Inc (NYSE: EVRG) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full twenty year investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.
| Start date: | 09/27/1999 |
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| End date: | 09/26/2019 | ||||
| Start price/share: | $21.06 | ||||
| End price/share: | $67.31 | ||||
| Starting shares: | 474.78 | ||||
| Ending shares: | 1,230.67 | ||||
| Dividends reinvested/share: | $25.32 | ||||
| Total return: | 728.36% | ||||
| Average annual return: | 11.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $82,777.16 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 11.14%. This would have turned a $10K investment made 20 years ago into $82,777.16 today (as of 09/26/2019). On a total return basis, that’s a result of 728.36% (something to think about: how might EVRG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Evergy Inc paid investors a total of $25.32/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 1.9/share, we calculate that EVRG has a current yield of approximately 2.82%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.9 against the original $21.06/share purchase price. This works out to a yield on cost of 13.39%.
More investment wisdom to ponder:
“We ignore outlooks and forecasts… we’re lousy at it and we admit it … everyone else is lousy too, but most people won’t admit it.” — Martin Whitman
