“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Ventas Inc (NYSE: VTR)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.
| Start date: | 07/15/1999 |
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| End date: | 07/12/2019 | ||||
| Start price/share: | $5.57 | ||||
| End price/share: | $69.12 | ||||
| Starting shares: | 1,795.33 | ||||
| Ending shares: | 6,368.38 | ||||
| Dividends reinvested/share: | $53.34 | ||||
| Total return: | 4,301.82% | ||||
| Average annual return: | 20.83% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $440,499.87 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 20.83%. This would have turned a $10K investment made 20 years ago into $440,499.87 today (as of 07/12/2019). On a total return basis, that’s a result of 4,301.82% (something to think about: how might VTR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Ventas Inc paid investors a total of $53.34/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 3.17/share, we calculate that VTR has a current yield of approximately 4.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.17 against the original $5.57/share purchase price. This works out to a yield on cost of 82.41%.
Another great investment quote to think about:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
