“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 decade-long holding period for an investor who was considering DTE Energy Co (NYSE: DTE) back in 2014, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 05/08/2014 |
|
|||
| End date: | 05/07/2024 | ||||
| Start price/share: | $66.36 | ||||
| End price/share: | $113.34 | ||||
| Starting shares: | 150.69 | ||||
| Ending shares: | 210.25 | ||||
| Dividends reinvested/share: | $31.51 | ||||
| Total return: | 138.30% | ||||
| Average annual return: | 9.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $23,837.45 | ||||
The above analysis shows the decade-long investment result worked out well, with an annualized rate of return of 9.07%. This would have turned a $10K investment made 10 years ago into $23,837.45 today (as of 05/07/2024). On a total return basis, that’s a result of 138.30% (something to think about: how might DTE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that DTE Energy Co paid investors a total of $31.51/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 4.08/share, we calculate that DTE has a current yield of approximately 3.60%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.08 against the original $66.36/share purchase price. This works out to a yield on cost of 5.42%.
One more investment quote to leave you with:
“Only when the tide goes out do you discover who’s been swimming naked.” — Warren Buffett
