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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

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering DTE Energy Co (NYSE: DTE) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 10/30/2014


End date: 10/29/2019
Start price/share: $81.99
End price/share: $126.59
Starting shares: 121.97
Ending shares: 143.66
Dividends reinvested/share: $16.37
Total return: 81.86%
Average annual return: 12.71%
Starting investment: $10,000.00
Ending investment: $18,189.14

The above analysis shows the five year investment result worked out quite well, with an annualized rate of return of 12.71%. This would have turned a $10K investment made 5 years ago into $18,189.14 today (as of 10/29/2019). On a total return basis, that’s a result of 81.86% (something to think about: how might DTE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that DTE Energy Co paid investors a total of $16.37/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 3.78/share, we calculate that DTE has a current yield of approximately 2.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.78 against the original $81.99/share purchase price. This works out to a yield on cost of 3.65%.

One more piece of investment wisdom to leave you with:
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle