“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Exelon Corp (NASD: EXC)? Today, we examine the outcome of a ten year investment into the stock back in 2011.
| Start date: | 02/09/2011 |
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| End date: | 02/08/2021 | ||||
| Start price/share: | $43.08 | ||||
| End price/share: | $43.74 | ||||
| Starting shares: | 232.13 | ||||
| Ending shares: | 348.35 | ||||
| Dividends reinvested/share: | $15.07 | ||||
| Total return: | 52.37% | ||||
| Average annual return: | 4.30% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,238.54 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 4.30%. This would have turned a $10K investment made 10 years ago into $15,238.54 today (as of 02/08/2021). On a total return basis, that’s a result of 52.37% (something to think about: how might EXC shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Exelon Corp paid investors a total of $15.07/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 1.53/share, we calculate that EXC has a current yield of approximately 3.50%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.53 against the original $43.08/share purchase price. This works out to a yield on cost of 8.12%.
Another great investment quote to think about:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
