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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a two-decade holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Dominion Energy Inc (NYSE: D) back in 2003: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 10/13/2003
$10,000

10/13/2003
  $30,370

10/10/2023
End date: 10/10/2023
Start price/share: $31.27
End price/share: $42.59
Starting shares: 319.80
Ending shares: 712.50
Dividends reinvested/share: $45.59
Total return: 203.45%
Average annual return: 5.71%
Starting investment: $10,000.00
Ending investment: $30,370.62

As shown above, the two-decade investment result worked out well, with an annualized rate of return of 5.71%. This would have turned a $10K investment made 20 years ago into $30,370.62 today (as of 10/10/2023). On a total return basis, that’s a result of 203.45% (something to think about: how might D shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Dominion Energy Inc paid investors a total of $45.59/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 2.67/share, we calculate that D has a current yield of approximately 6.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.67 against the original $31.27/share purchase price. This works out to a yield on cost of 20.05%.

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