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“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— 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 Essex Property Trust Inc (NYSE: ESS)? Today, we examine the outcome of a twenty year investment into the stock back in 1999.

Start date: 08/16/1999


End date: 08/14/2019
Start price/share: $33.12
End price/share: $307.28
Starting shares: 301.89
Ending shares: 646.27
Dividends reinvested/share: $85.36
Total return: 1,885.85%
Average annual return: 16.11%
Starting investment: $10,000.00
Ending investment: $198,575.51

The above analysis shows the twenty year investment result worked out exceptionally well, with an annualized rate of return of 16.11%. This would have turned a $10K investment made 20 years ago into $198,575.51 today (as of 08/14/2019). On a total return basis, that’s a result of 1,885.85% (something to think about: how might ESS shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Essex Property Trust Inc paid investors a total of $85.36/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 7.8/share, we calculate that ESS has a current yield of approximately 2.54%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 7.8 against the original $33.12/share purchase price. This works out to a yield on cost of 7.67%.

Another great investment quote to think about:
“Generally, the greater the stigma or revulsion, the better the bargain.” — Seth Klarman