“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 decade-long 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 decade-long investment into the stock back in 2011.
| Start date: | 06/06/2011 |
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| End date: | 06/03/2021 | ||||
| Start price/share: | $13.85 | ||||
| End price/share: | $72.37 | ||||
| Starting shares: | 722.02 | ||||
| Ending shares: | 964.11 | ||||
| Dividends reinvested/share: | $9.41 | ||||
| Total return: | 597.73% | ||||
| Average annual return: | 21.44% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,761.79 | ||||
The above analysis shows the decade-long investment result worked out exceptionally well, with an annualized rate of return of 21.44%. This would have turned a $10K investment made 10 years ago into $69,761.79 today (as of 06/03/2021). On a total return basis, that’s a result of 597.73% (something to think about: how might NEE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that NextEra Energy Inc paid investors a total of $9.41/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 1.54/share, we calculate that NEE has a current yield of approximately 2.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.54 against the original $13.85/share purchase price. This works out to a yield on cost of 15.38%.
One more piece of investment wisdom to leave you with:
“Price is what you pay. Value is what you get.” — Warren Buffett
