“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 Kinder Morgan Inc. (NYSE: KMI)? Today, we examine the outcome of a decade-long investment into the stock back in 2012.
| Start date: | 05/14/2012 |
|
|||
| End date: | 05/11/2022 | ||||
| Start price/share: | $33.55 | ||||
| End price/share: | $18.52 | ||||
| Starting shares: | 298.06 | ||||
| Ending shares: | 478.02 | ||||
| Dividends reinvested/share: | $11.23 | ||||
| Total return: | -11.47% | ||||
| Average annual return: | -1.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,854.10 | ||||
The above analysis shows the decade-long investment result worked out poorly, with an annualized rate of return of -1.21%. This would have turned a $10K investment made 10 years ago into $8,854.10 today (as of 05/11/2022). On a total return basis, that’s a result of -11.47% (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 $11.23/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 1.11/share, we calculate that KMI has a current yield of approximately 5.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.11 against the original $33.55/share purchase price. This works out to a yield on cost of 17.85%.
Another great investment quote to think about:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
