“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 ONEOK Inc (NYSE: OKE)? Today, we examine the outcome of a twenty year investment into the stock back in 2003.
| Start date: | 08/28/2003 |
|
|||
| End date: | 08/25/2023 | ||||
| Start price/share: | $9.19 | ||||
| End price/share: | $64.95 | ||||
| Starting shares: | 1,088.14 | ||||
| Ending shares: | 2,860.38 | ||||
| Dividends reinvested/share: | $38.08 | ||||
| Total return: | 1,757.82% | ||||
| Average annual return: | 15.73% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $185,894.57 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 15.73%. This would have turned a $10K investment made 20 years ago into $185,894.57 today (as of 08/25/2023). On a total return basis, that’s a result of 1,757.82% (something to think about: how might OKE shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that ONEOK Inc paid investors a total of $38.08/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 3.82/share, we calculate that OKE has a current yield of approximately 5.88%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.82 against the original $9.19/share purchase price. This works out to a yield on cost of 63.98%.
One more piece of investment wisdom to leave you with:
“Wide diversification is only required when investors do not understand what they are doing.” — Warren Buffett
