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

— Warren Buffett

Investors can learn a lot from Warren Buffett, whose above quote teaches the importance of thinking about investment time horizon, and asking ourselves before buying any given stock: can we envision holding onto it for years — even a two-decade holding period possibly?

Suppose a “buy-and-hold” investor was considering an investment into Ventas Inc (NYSE: VTR) back in 1999: back then, such an investor may have been pondering this very same question. Had they answered “yes” to a full two-decade investment time horizon and then actually held for these past 20 years, here’s how that investment would have turned out.

Start date: 09/17/1999


End date: 09/16/2019
Start price/share: $5.78
End price/share: $70.86
Starting shares: 1,730.10
Ending shares: 6,137.00
Dividends reinvested/share: $53.34
Total return: 4,248.68%
Average annual return: 20.75%
Starting investment: $10,000.00
Ending investment: $435,151.20

As we can see, the two-decade investment result worked out exceptionally well, with an annualized rate of return of 20.75%. This would have turned a $10K investment made 20 years ago into $435,151.20 today (as of 09/16/2019). On a total return basis, that’s a result of 4,248.68% (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 4.47%. 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 $5.78/share purchase price. This works out to a yield on cost of 77.34%.

Here’s one more great investment quote before you go:
“You can’t restate a dividend.” — Malon Wilkus