“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into PG&E Corp (NYSE: PCG)? Today, we examine the outcome of a twenty year investment into the stock back in 2004.
| Start date: | 11/22/2004 |
|
|||
| End date: | 11/20/2024 | ||||
| Start price/share: | $33.98 | ||||
| End price/share: | $21.10 | ||||
| Starting shares: | 294.29 | ||||
| Ending shares: | 478.00 | ||||
| Dividends reinvested/share: | $21.96 | ||||
| Total return: | 0.86% | ||||
| Average annual return: | 0.04% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,080.34 | ||||
As shown above, the twenty year investment result worked out as follows, with an annualized rate of return of 0.04%. This would have turned a $10K investment made 20 years ago into $10,080.34 today (as of 11/20/2024). On a total return basis, that’s a result of 0.86% (something to think about: how might PCG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that PG&E Corp paid investors a total of $21.96/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 .04/share, we calculate that PCG has a current yield of approximately 0.19%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .04 against the original $33.98/share purchase price. This works out to a yield on cost of 0.56%.
More investment wisdom to ponder:
“I made my money by selling too soon.” — Bernard Baruch
