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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

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Consolidated Edison Inc (NYSE: ED)? Today, we examine the outcome of a five year investment into the stock back in 2017.

Start date: 10/09/2017


End date: 10/06/2022
Start price/share: $81.49
End price/share: $84.00
Starting shares: 122.71
Ending shares: 147.64
Dividends reinvested/share: $15.04
Total return: 24.02%
Average annual return: 4.40%
Starting investment: $10,000.00
Ending investment: $12,399.38

As we can see, the five year investment result worked out as follows, with an annualized rate of return of 4.40%. This would have turned a $10K investment made 5 years ago into $12,399.38 today (as of 10/06/2022). On a total return basis, that’s a result of 24.02% (something to think about: how might ED shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Consolidated Edison Inc paid investors a total of $15.04/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 3.16/share, we calculate that ED has a current yield of approximately 3.76%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.16 against the original $81.49/share purchase price. This works out to a yield on cost of 4.61%.

Here’s one more great investment quote before you go:
“Smart investing doesn’t consist of buying good assets but of buying assets well. This is a very, very important distinction that very, very few people understand.” — Howard Marks