“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 Duke Energy Corp (NYSE: DUK)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 05/01/2018 |
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| End date: | 04/28/2023 | ||||
| Start price/share: | $79.83 | ||||
| End price/share: | $98.88 | ||||
| Starting shares: | 125.27 | ||||
| Ending shares: | 154.01 | ||||
| Dividends reinvested/share: | $19.20 | ||||
| Total return: | 52.29% | ||||
| Average annual return: | 8.79% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $15,231.56 | ||||
As we can see, the five year investment result worked out well, with an annualized rate of return of 8.79%. This would have turned a $10K investment made 5 years ago into $15,231.56 today (as of 04/28/2023). On a total return basis, that’s a result of 52.29% (something to think about: how might DUK shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Duke Energy Corp paid investors a total of $19.20/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 4.02/share, we calculate that DUK has a current yield of approximately 4.07%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.02 against the original $79.83/share purchase price. This works out to a yield on cost of 5.10%.
Here’s one more great investment quote before you go:
“Confronted with a challenge to distill the secret of sound investment into three words, we venture the motto, Margin of Safety.” — Benjamin Graham
