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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 Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into FirstEnergy Corp (NYSE: FE)? Today, we examine the outcome of a ten year investment into the stock back in 2010.

Start date: 11/17/2010


End date: 11/16/2020
Start price/share: $35.70
End price/share: $28.50
Starting shares: 280.11
Ending shares: 445.45
Dividends reinvested/share: $17.43
Total return: 26.95%
Average annual return: 2.41%
Starting investment: $10,000.00
Ending investment: $12,690.55

As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 2.41%. This would have turned a $10K investment made 10 years ago into $12,690.55 today (as of 11/16/2020). On a total return basis, that’s a result of 26.95% (something to think about: how might FE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that FirstEnergy Corp paid investors a total of $17.43/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 1.56/share, we calculate that FE has a current yield of approximately 5.47%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.56 against the original $35.70/share purchase price. This works out to a yield on cost of 15.32%.

More investment wisdom to ponder:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett