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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a decade-long period?

Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Public Service Enterprise Group Inc (NYSE: PEG), by taking a look at the investment outcome over a decade-long holding period.

Start date: 02/26/2014


End date: 02/23/2024
Start price/share: $36.66
End price/share: $60.75
Starting shares: 272.78
Ending shares: 390.93
Dividends reinvested/share: $18.52
Total return: 137.49%
Average annual return: 9.04%
Starting investment: $10,000.00
Ending investment: $23,755.02

The above analysis shows the decade-long investment result worked out well, with an annualized rate of return of 9.04%. This would have turned a $10K investment made 10 years ago into $23,755.02 today (as of 02/23/2024). On a total return basis, that’s a result of 137.49% (something to think about: how might PEG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Public Service Enterprise Group Inc paid investors a total of $18.52/share in dividends over the 10 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 2.4/share, we calculate that PEG has a current yield of approximately 3.95%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.4 against the original $36.66/share purchase price. This works out to a yield on cost of 10.77%.

One more investment quote to leave you with:
“Taking risks is really the only way to consistently achieve above-average returns.” — Sam Zell