“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Duke Energy Corp (NYSE: DUK)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 06/24/2002 |
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| End date: | 06/22/2022 | ||||
| Start price/share: | $55.20 | ||||
| End price/share: | $100.16 | ||||
| Starting shares: | 181.16 | ||||
| Ending shares: | 476.25 | ||||
| Dividends reinvested/share: | $60.52 | ||||
| Total return: | 377.01% | ||||
| Average annual return: | 8.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,686.94 | ||||
As shown above, the twenty year investment result worked out well, with an annualized rate of return of 8.12%. This would have turned a $10K investment made 20 years ago into $47,686.94 today (as of 06/22/2022). On a total return basis, that’s a result of 377.01% (something to think about: how might DUK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Duke Energy Corp paid investors a total of $60.52/share in dividends over the 20 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 3.93%. 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 $55.20/share purchase price. This works out to a yield on cost of 7.12%.
Another great investment quote to think about:
“The stock market is the story of cycles and of the human behavior that is responsible for overreactions in both directions.” — Seth Klarman
