“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Duke Realty Corp (NYSE: DRE) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 07/31/2009 |
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| End date: | 07/30/2019 | ||||
| Start price/share: | $9.49 | ||||
| End price/share: | $33.68 | ||||
| Starting shares: | 1,053.74 | ||||
| Ending shares: | 1,650.40 | ||||
| Dividends reinvested/share: | $8.22 | ||||
| Total return: | 455.85% | ||||
| Average annual return: | 18.71% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $55,600.30 | ||||
As we can see, the decade-long investment result worked out exceptionally well, with an annualized rate of return of 18.71%. This would have turned a $10K investment made 10 years ago into $55,600.30 today (as of 07/30/2019). On a total return basis, that’s a result of 455.85% (something to think about: how might DRE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Duke Realty Corp paid investors a total of $8.22/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 .86/share, we calculate that DRE has a current yield of approximately 2.55%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .86 against the original $9.49/share purchase price. This works out to a yield on cost of 26.87%.
One more piece of investment wisdom to leave you with:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell
