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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— 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 two-decade holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Realty Income Corp (NYSE: O) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 04/09/1999


End date: 04/08/2019
Start price/share: $10.88
End price/share: $72.00
Starting shares: 919.12
Ending shares: 3,010.25
Dividends reinvested/share: $34.32
Total return: 2,067.38%
Average annual return: 16.62%
Starting investment: $10,000.00
Ending investment: $216,866.52

As shown above, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 16.62%. This would have turned a $10K investment made 20 years ago into $216,866.52 today (as of 04/08/2019). On a total return basis, that’s a result of 2,067.38% (something to think about: how might O shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Realty Income Corp paid investors a total of $34.32/share in dividends over the 20 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 2.712/share, we calculate that O has a current yield of approximately 3.77%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.712 against the original $10.88/share purchase price. This works out to a yield on cost of 34.65%.

One more investment quote to leave you with:
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.” — George Soros