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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a ten year holding period possibly?
Suppose a “buy-and-hold” investor was considering an investment into Xcel Energy Inc (NASD: XEL) back in 2016. Xcel Energy is a regulated electric and natural gas utility serving approximately 3.8 million electricity customers and 2.1 million natural gas customers across eight states, including Colorado, Minnesota, Texas and New Mexico, with a growing portfolio of wind and solar generation. Back then, such an investor may have been pondering this very same question about time horizon. Had they answered “yes” to a full ten year investment time horizon and then actually held for these past 10 years with dividends reinvested, here’s how that investment would have turned out.
| Start date: | 03/10/2016 |
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| End date: | 03/09/2026 | ||||
| Start price/share: | $40.74 | ||||
| End price/share: | $82.10 | ||||
| Starting shares: | 245.46 | ||||
| Ending shares: | 334.13 | ||||
| Dividends reinvested/share: | $18.00 | ||||
| Total return: | 174.32% | ||||
| Average annual return: | 10.62% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $27,436.99 | ||||
As we can see, the ten year investment result worked out quite well, with an annualized rate of return of 10.62%. This would have turned a $10K investment made 10 years ago into $27,436.99 today (as of 03/09/2026). On a total return basis, that’s a result of 174.32%. For context, that is broadly in line with the long-run average annual total return of the U.S. equity market, but with the comparatively lower volatility profile that investors typically associate with regulated utilities.
It is also worth noting that this period included several challenging macro environments — most notably the 2020 pandemic shock, subsequent interest rate increases and elevated inflation. Throughout that time, Xcel Energy continued to pay and raise its dividend, illustrating why many income-oriented investors use utilities as a defensive core holding. (These numbers were computed with the Dividend Channel DRIP Returns Calculator.)
Notice that Xcel Energy Inc paid investors a total of $18.00/share in dividends over the 10 year 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). Over a decade, that reinvestment lifted the share count from 245.46 to 334.13, meaning that a larger base of shares was in place to collect each subsequent dividend increase.
Based upon the most recent annualized dividend rate of 2.37/share, we calculate that XEL has a current yield of approximately 2.89%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.37 against the original $40.74/share purchase price. This works out to a yield on cost of 7.09%. In practical terms, an investor who bought in 2016 and held through 2026 is now earning more than 7% annually, in cash dividends alone, on the original capital committed.
From a fundamentals perspective, Xcel Energy has historically targeted long-term earnings per share growth in the mid-single to high-single digits, supported by regulated capital investment in its transmission and distribution networks and by large-scale wind projects in states such as Colorado and Minnesota. Multi-year regulatory rate settlements and long-term power purchase agreements have tended to underpin relatively stable cash flows, which is a key enabler of a consistent dividend policy. However, like all utilities, Xcel remains exposed to regulatory decisions, fuel cost recovery mechanisms, and, increasingly, the capital intensity and execution risk associated with decarbonization plans.
Looking ahead, the same framework that would have guided a decision back in 2016 still applies: investors need to assess whether XEL’s combination of regulated earnings visibility, dividend growth potential and balance sheet strength is likely to justify a new ten year holding period from today’s valuation levels. Past performance does not guarantee future results, but this 2016–2026 case study illustrates how a high-quality, dividend-paying utility can compound capital over a full market cycle when held with discipline.
Here’s one more great investment quote before you go:
“I rarely think the market is right. I believe non-dividend stocks aren’t much more than baseball cards. They are worth what you can convince someone to pay for it.” — Mark Cuban
