“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 SBA Communications Corp (NASD: SBAC)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 12/11/2014 |
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| End date: | 12/10/2019 | ||||
| Start price/share: | $109.97 | ||||
| End price/share: | $235.60 | ||||
| Starting shares: | 90.93 | ||||
| Ending shares: | 91.20 | ||||
| Dividends reinvested/share: | $0.74 | ||||
| Total return: | 114.87% | ||||
| Average annual return: | 16.53% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $21,487.64 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 16.53%. This would have turned a $10K investment made 5 years ago into $21,487.64 today (as of 12/10/2019). On a total return basis, that’s a result of 114.87% (something to think about: how might SBAC shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that SBA Communications Corp paid investors a total of $0.74/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 1.48/share, we calculate that SBAC has a current yield of approximately 0.63%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.48 against the original $109.97/share purchase price. This works out to a yield on cost of 0.57%.
Another great investment quote to think about:
“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle
