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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

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into NextEra Energy Inc (NYSE: NEE)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 10/16/2015


End date: 10/15/2020
Start price/share: $103.66
End price/share: $298.46
Starting shares: 96.47
Ending shares: 109.98
Dividends reinvested/share: $21.82
Total return: 228.25%
Average annual return: 26.82%
Starting investment: $10,000.00
Ending investment: $32,826.26

As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 26.82%. This would have turned a $10K investment made 5 years ago into $32,826.26 today (as of 10/15/2020). On a total return basis, that’s a result of 228.25% (something to think about: how might NEE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that NextEra Energy Inc paid investors a total of $21.82/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 5.6/share, we calculate that NEE has a current yield of approximately 1.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.6 against the original $103.66/share purchase price. This works out to a yield on cost of 1.81%.

More investment wisdom to ponder:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain