“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Realty Income Corp (NYSE: O)? Today, we examine the outcome of a ten year investment into the stock back in 2009.
| Start date: | 08/03/2009 |
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| End date: | 08/01/2019 | ||||
| Start price/share: | $23.91 | ||||
| End price/share: | $69.67 | ||||
| Starting shares: | 418.24 | ||||
| Ending shares: | 671.87 | ||||
| Dividends reinvested/share: | $21.60 | ||||
| Total return: | 368.09% | ||||
| Average annual return: | 16.69% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $46,809.76 | ||||
The above analysis shows the ten year investment result worked out exceptionally well, with an annualized rate of return of 16.69%. This would have turned a $10K investment made 10 years ago into $46,809.76 today (as of 08/01/2019). On a total return basis, that’s a result of 368.09% (something to think about: how might O shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Realty Income Corp paid investors a total of $21.60/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 2.718/share, we calculate that O 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 2.718 against the original $23.91/share purchase price. This works out to a yield on cost of 16.31%.
One more piece of investment wisdom to leave you with:
“In the long run, we are all dead.” — John Maynard Keynes
