“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 Kinder Morgan Inc. (NYSE: KMI)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 06/15/2011 |
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| End date: | 06/14/2021 | ||||
| Start price/share: | $29.36 | ||||
| End price/share: | $18.84 | ||||
| Starting shares: | 340.60 | ||||
| Ending shares: | 533.83 | ||||
| Dividends reinvested/share: | $11.38 | ||||
| Total return: | 0.57% | ||||
| Average annual return: | 0.06% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,060.20 | ||||
As shown above, the ten year investment result worked out as follows, with an annualized rate of return of 0.06%. This would have turned a $10K investment made 10 years ago into $10,060.20 today (as of 06/14/2021). On a total return basis, that’s a result of 0.57% (something to think about: how might KMI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kinder Morgan Inc. paid investors a total of $11.38/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 1.08/share, we calculate that KMI has a current yield of approximately 5.73%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.08 against the original $29.36/share purchase price. This works out to a yield on cost of 19.52%.
More investment wisdom to ponder:
“Taking risks is really the only way to consistently achieve above-average returns.” — Sam Zell
