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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

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Duke Energy Corp (NYSE: DUK) back in 2017: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 05/09/2017


End date: 05/06/2022
Start price/share: $82.11
End price/share: $111.32
Starting shares: 121.79
Ending shares: 150.21
Dividends reinvested/share: $18.72
Total return: 67.22%
Average annual return: 10.84%
Starting investment: $10,000.00
Ending investment: $16,720.05

As shown above, the five year investment result worked out quite well, with an annualized rate of return of 10.84%. This would have turned a $10K investment made 5 years ago into $16,720.05 today (as of 05/06/2022). On a total return basis, that’s a result of 67.22% (something to think about: how might DUK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Duke Energy Corp paid investors a total of $18.72/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 3.94/share, we calculate that DUK has a current yield of approximately 3.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.94 against the original $82.11/share purchase price. This works out to a yield on cost of 4.31%.

More investment wisdom to ponder:
“Finding the best person or the best organization to invest your money is one of the most important financial decisions you’ll ever make.” — Bill Gross