“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into SL Green Realty Corp (NYSE: SLG)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 10/22/2014 |
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| End date: | 10/21/2019 | ||||
| Start price/share: | $110.60 | ||||
| End price/share: | $81.29 | ||||
| Starting shares: | 90.42 | ||||
| Ending shares: | 105.21 | ||||
| Dividends reinvested/share: | $15.03 | ||||
| Total return: | -14.48% | ||||
| Average annual return: | -3.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $8,551.99 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -3.08%. This would have turned a $10K investment made 5 years ago into $8,551.99 today (as of 10/21/2019). On a total return basis, that’s a result of -14.48% (something to think about: how might SLG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that SL Green Realty Corp paid investors a total of $15.03/share in dividends over the 5 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 3.4/share, we calculate that SLG has a current yield of approximately 4.18%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.4 against the original $110.60/share purchase price. This works out to a yield on cost of 3.78%.
More investment wisdom to ponder:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
