“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— 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 twenty year holding period for an investor who was considering Welltower Inc (NYSE: WELL) back in 1999, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 12/06/1999 |
|
|||
| End date: | 12/05/2019 | ||||
| Start price/share: | $15.25 | ||||
| End price/share: | $84.06 | ||||
| Starting shares: | 655.74 | ||||
| Ending shares: | 2,411.79 | ||||
| Dividends reinvested/share: | $56.05 | ||||
| Total return: | 1,927.35% | ||||
| Average annual return: | 16.23% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $202,805.89 | ||||
As shown above, the twenty year investment result worked out exceptionally well, with an annualized rate of return of 16.23%. This would have turned a $10K investment made 20 years ago into $202,805.89 today (as of 12/05/2019). On a total return basis, that’s a result of 1,927.35% (something to think about: how might WELL shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Welltower Inc paid investors a total of $56.05/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 3.48/share, we calculate that WELL has a current yield of approximately 4.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.48 against the original $15.25/share purchase price. This works out to a yield on cost of 27.15%.
More investment wisdom to ponder:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
