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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a decade-long holding period for an investor who was considering Simon Property Group, Inc. (NYSE: SPG) back in 2009, bought the stock, ignored the market’s ups and downs, and simply held through to today.

Start date: 11/27/2009
$10,000

11/27/2009
$32,386

11/25/2019
End date: 11/25/2019
Start price/share: $65.60
End price/share: $149.24
Starting shares: 152.44
Ending shares: 216.93
Dividends reinvested/share: $54.87
Total return: 223.75%
Average annual return: 12.47%
Starting investment: $10,000.00
Ending investment: $32,386.72

As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 12.47%. This would have turned a $10K investment made 10 years ago into $32,386.72 today (as of 11/25/2019). On a total return basis, that’s a result of 223.75% (something to think about: how might SPG shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Simon Property Group, Inc. paid investors a total of $54.87/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 8.4/share, we calculate that SPG has a current yield of approximately 5.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8.4 against the original $65.60/share purchase price. This works out to a yield on cost of 8.58%.

Another great investment quote to think about:
“The best stock to buy is the one you already own.” — Peter Lynch