“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into PG&E Corp (NYSE: PCG)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 04/21/2003 |
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| End date: | 04/17/2023 | ||||
| Start price/share: | $14.66 | ||||
| End price/share: | $16.86 | ||||
| Starting shares: | 682.13 | ||||
| Ending shares: | 1,105.47 | ||||
| Dividends reinvested/share: | $21.92 | ||||
| Total return: | 86.38% | ||||
| Average annual return: | 3.16% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $18,632.18 | ||||
As shown above, the two-decade investment result worked out as follows, with an annualized rate of return of 3.16%. This would have turned a $10K investment made 20 years ago into $18,632.18 today (as of 04/17/2023). On a total return basis, that’s a result of 86.38% (something to think about: how might PCG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that PG&E Corp paid investors a total of $21.92/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 2.12/share, we calculate that PCG has a current yield of approximately 12.57%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.12 against the original $14.66/share purchase price. This works out to a yield on cost of 85.74%.
Here’s one more great investment quote before you go:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton
