“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 Duke Energy Corp (NYSE: DUK) back in 2005, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 02/03/2005 |
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| End date: | 01/31/2025 | ||||
| Start price/share: | $47.37 | ||||
| End price/share: | $111.99 | ||||
| Starting shares: | 211.10 | ||||
| Ending shares: | 533.46 | ||||
| Dividends reinvested/share: | $65.94 | ||||
| Total return: | 497.42% | ||||
| Average annual return: | 9.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $59,784.48 | ||||
The above analysis shows the twenty year investment result worked out well, with an annualized rate of return of 9.35%. This would have turned a $10K investment made 20 years ago into $59,784.48 today (as of 01/31/2025). On a total return basis, that’s a result of 497.42% (something to think about: how might DUK shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Duke Energy Corp paid investors a total of $65.94/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 4.18/share, we calculate that DUK has a current yield of approximately 3.73%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.18 against the original $47.37/share purchase price. This works out to a yield on cost of 7.87%.
Here’s one more great investment quote before you go:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger
