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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 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