“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 Pinnacle West Capital Corp (NYSE: PNW)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 12/11/2017 |
|
|||
| End date: | 12/08/2022 | ||||
| Start price/share: | $91.22 | ||||
| End price/share: | $77.78 | ||||
| Starting shares: | 109.63 | ||||
| Ending shares: | 133.49 | ||||
| Dividends reinvested/share: | $15.75 | ||||
| Total return: | 3.83% | ||||
| Average annual return: | 0.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,385.39 | ||||
As shown above, the five year investment result worked out as follows, with an annualized rate of return of 0.76%. This would have turned a $10K investment made 5 years ago into $10,385.39 today (as of 12/08/2022). On a total return basis, that’s a result of 3.83% (something to think about: how might PNW shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Pinnacle West Capital Corp paid investors a total of $15.75/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 3.46/share, we calculate that PNW has a current yield of approximately 4.45%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.46 against the original $91.22/share purchase price. This works out to a yield on cost of 4.88%.
Another great investment quote to think about:
“Cash combined with courage in a time of crisis is priceless.” — Warren Buffett
