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“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


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