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“I buy on the assumption that they could close the market the next day and not reopen it for five years.”

— 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 five year holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Quanta Services, Inc. (NYSE: PWR) back in 2019: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full five year investment time horizon and then actually held for these past 5 years, here’s how that investment would have turned out.

Start date: 09/20/2019
$10,000

09/20/2019
  $78,175

09/19/2024
End date: 09/19/2024
Start price/share: $37.59
End price/share: $289.73
Starting shares: 266.03
Ending shares: 269.80
Dividends reinvested/share: $1.35
Total return: 681.70%
Average annual return: 50.84%
Starting investment: $10,000.00
Ending investment: $78,175.69

The above analysis shows the five year investment result worked out exceptionally well, with an annualized rate of return of 50.84%. This would have turned a $10K investment made 5 years ago into $78,175.69 today (as of 09/19/2024). On a total return basis, that’s a result of 681.70% (something to think about: how might PWR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Quanta Services, Inc. paid investors a total of $1.35/share in dividends over the 5 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 .36/share, we calculate that PWR has a current yield of approximately 0.12%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .36 against the original $37.59/share purchase price. This works out to a yield on cost of 0.32%.

One more investment quote to leave you with:
“If I’ve learned one thing in this life it’s this: even if you lose, don’t lose the lesson.” — Daymond John