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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?

Today, let’s look backwards in time to 2010, and take a look at what happened to investors who asked that very question about Duke Energy Corp (NYSE: DUK), by taking a look at the investment outcome over a ten year holding period.

Start date: 07/14/2010


End date: 07/13/2020
Start price/share: $50.88
End price/share: $81.42
Starting shares: 196.54
Ending shares: 308.64
Dividends reinvested/share: $33.07
Total return: 151.29%
Average annual return: 9.65%
Starting investment: $10,000.00
Ending investment: $25,136.55

As shown above, the ten year investment result worked out well, with an annualized rate of return of 9.65%. This would have turned a $10K investment made 10 years ago into $25,136.55 today (as of 07/13/2020). On a total return basis, that’s a result of 151.29% (something to think about: how might DUK shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Duke Energy Corp paid investors a total of $33.07/share in dividends over the 10 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 3.86/share, we calculate that DUK has a current yield of approximately 4.74%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.86 against the original $50.88/share purchase price. This works out to a yield on cost of 9.32%.

More investment wisdom to ponder:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton