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

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a twenty year holding period for an investor who was considering Xcel Energy Inc (NASD: XEL) back in 2004, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 03/19/2004


End date: 03/18/2024
Start price/share: $18.24
End price/share: $52.04
Starting shares: 548.25
Ending shares: 1,178.23
Dividends reinvested/share: $26.15
Total return: 513.15%
Average annual return: 9.49%
Starting investment: $10,000.00
Ending investment: $61,349.74

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 9.49%. This would have turned a $10K investment made 20 years ago into $61,349.74 today (as of 03/18/2024). On a total return basis, that’s a result of 513.15% (something to think about: how might XEL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Xcel Energy Inc paid investors a total of $26.15/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 2.19/share, we calculate that XEL has a current yield of approximately 4.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.19 against the original $18.24/share purchase price. This works out to a yield on cost of 23.08%.

One more investment quote to leave you with:
“The person who starts simply with the idea of getting rich won’t succeed; you must have a larger ambition.” — John Rockefeller