“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 Eversource Energy (NYSE: ES)? Today, we examine the outcome of a two-decade investment into the stock back in 2003.
| Start date: | 12/15/2003 |
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| End date: | 12/13/2023 | ||||
| Start price/share: | $19.52 | ||||
| End price/share: | $63.09 | ||||
| Starting shares: | 512.30 | ||||
| Ending shares: | 979.27 | ||||
| Dividends reinvested/share: | $29.84 | ||||
| Total return: | 517.82% | ||||
| Average annual return: | 9.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $61,799.74 | ||||
As we can see, the two-decade investment result worked out well, with an annualized rate of return of 9.53%. This would have turned a $10K investment made 20 years ago into $61,799.74 today (as of 12/13/2023). On a total return basis, that’s a result of 517.82% (something to think about: how might ES shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Eversource Energy paid investors a total of $29.84/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 2.7/share, we calculate that ES has a current yield of approximately 4.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.7 against the original $19.52/share purchase price. This works out to a yield on cost of 21.93%.
One more piece of investment wisdom to leave you with:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
