“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Alliant Energy Corp (NASD: LNT)? Today, we examine the outcome of a five year investment into the stock back in 2019.
Start date: | 12/11/2019 |
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End date: | 12/10/2024 | ||||
Start price/share: | $53.04 | ||||
End price/share: | $60.70 | ||||
Starting shares: | 188.54 | ||||
Ending shares: | 220.55 | ||||
Dividends reinvested/share: | $8.58 | ||||
Total return: | 33.88% | ||||
Average annual return: | 6.01% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $13,390.71 |
The above analysis shows the five year investment result worked out well, with an annualized rate of return of 6.01%. This would have turned a $10K investment made 5 years ago into $13,390.71 today (as of 12/10/2024). On a total return basis, that’s a result of 33.88% (something to think about: how might LNT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Alliant Energy Corp paid investors a total of $8.58/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 1.92/share, we calculate that LNT has a current yield of approximately 3.16%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.92 against the original $53.04/share purchase price. This works out to a yield on cost of 5.96%.
One more piece of investment wisdom to leave you with:
“October is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” — Mark Twain