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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

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 five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into WEC Energy Group Inc (NYSE: WEC) back in 2014: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 11/11/2014
$10,000

11/11/2014
$20,851

11/08/2019
End date: 11/08/2019
Start price/share: $49.73
End price/share: $87.83
Starting shares: 201.09
Ending shares: 237.40
Dividends reinvested/share: $10.18
Total return: 108.51%
Average annual return: 15.85%
Starting investment: $10,000.00
Ending investment: $20,851.15

As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 15.85%. This would have turned a $10K investment made 5 years ago into $20,851.15 today (as of 11/08/2019). On a total return basis, that’s a result of 108.51% (something to think about: how might WEC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that WEC Energy Group Inc paid investors a total of $10.18/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 2.36/share, we calculate that WEC has a current yield of approximately 2.69%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.36 against the original $49.73/share purchase price. This works out to a yield on cost of 5.41%.

One more piece of investment wisdom to leave you with:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch