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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 Kinder Morgan Inc. (NYSE: KMI)? Today, we examine the outcome of a ten year investment into the stock back in 2011.

Start date: 12/13/2011


End date: 12/10/2021
Start price/share: $29.20
End price/share: $16.16
Starting shares: 342.47
Ending shares: 542.51
Dividends reinvested/share: $11.32
Total return: -12.33%
Average annual return: -1.31%
Starting investment: $10,000.00
Ending investment: $8,764.59

The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -1.31%. This would have turned a $10K investment made 10 years ago into $8,764.59 today (as of 12/10/2021). On a total return basis, that’s a result of -12.33% (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 $11.32/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 6.68%. 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 $29.20/share purchase price. This works out to a yield on cost of 22.88%.

More investment wisdom to ponder:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch