“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into SL Green Realty Corp (NYSE: SLG)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 04/19/1999 |
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| End date: | 04/16/2019 | ||||
| Start price/share: | $19.69 | ||||
| End price/share: | $87.27 | ||||
| Starting shares: | 507.94 | ||||
| Ending shares: | 985.42 | ||||
| Dividends reinvested/share: | $39.24 | ||||
| Total return: | 759.98% | ||||
| Average annual return: | 11.36% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $86,067.76 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 11.36%. This would have turned a $10K investment made 20 years ago into $86,067.76 today (as of 04/16/2019). On a total return basis, that’s a result of 759.98% (something to think about: how might SLG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that SL Green Realty Corp paid investors a total of $39.24/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 3.4/share, we calculate that SLG has a current yield of approximately 3.90%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.4 against the original $19.69/share purchase price. This works out to a yield on cost of 19.81%.
Another great investment quote to think about:
“Searching for companies is like looking for grubs under rocks: if you turn over 10 rocks you’ll likely find one grub; if you turn over 20 rocks you’ll find two.” — Peter Lynch
