“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 Kinder Morgan Inc. (NYSE: KMI)? Today, we examine the outcome of a ten year investment into the stock back in 2014.
| Start date: | 07/10/2014 |
|
|||
| End date: | 07/09/2024 | ||||
| Start price/share: | $35.68 | ||||
| End price/share: | $19.99 | ||||
| Starting shares: | 280.27 | ||||
| Ending shares: | 468.45 | ||||
| Dividends reinvested/share: | $10.39 | ||||
| Total return: | -6.36% | ||||
| Average annual return: | -0.65% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,368.35 | ||||
The above analysis shows the ten year investment result worked out poorly, with an annualized rate of return of -0.65%. This would have turned a $10K investment made 10 years ago into $9,368.35 today (as of 07/09/2024). On a total return basis, that’s a result of -6.36% (something to think about: how might KMI shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kinder Morgan Inc. paid investors a total of $10.39/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 1.15/share, we calculate that KMI has a current yield of approximately 5.75%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.15 against the original $35.68/share purchase price. This works out to a yield on cost of 16.12%.
One more piece of investment wisdom to leave you with:
“You’ve got to be careful if you don’t know where you’re going, ’cause you might not get there.” — Yogi Berra
