“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 NextEra Energy Inc (NYSE: NEE)? Today, we examine the outcome of a five year investment into the stock back in 2017.
| Start date: | 08/29/2017 |
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| End date: | 08/26/2022 | ||||
| Start price/share: | $37.68 | ||||
| End price/share: | $88.06 | ||||
| Starting shares: | 265.39 | ||||
| Ending shares: | 295.64 | ||||
| Dividends reinvested/share: | $6.40 | ||||
| Total return: | 160.34% | ||||
| Average annual return: | 21.12% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,038.94 | ||||
As shown above, the five year investment result worked out exceptionally well, with an annualized rate of return of 21.12%. This would have turned a $10K investment made 5 years ago into $26,038.94 today (as of 08/26/2022). On a total return basis, that’s a result of 160.34% (something to think about: how might NEE shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that NextEra Energy Inc paid investors a total of $6.40/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 1.7/share, we calculate that NEE has a current yield of approximately 1.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.7 against the original $37.68/share purchase price. This works out to a yield on cost of 5.12%.
Another great investment quote to think about:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
