“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 Public Storage (NYSE: PSA)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 01/16/2015 |
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| End date: | 01/15/2020 | ||||
| Start price/share: | $202.25 | ||||
| End price/share: | $218.25 | ||||
| Starting shares: | 49.44 | ||||
| Ending shares: | 58.86 | ||||
| Dividends reinvested/share: | $37.80 | ||||
| Total return: | 28.46% | ||||
| Average annual return: | 5.14% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $12,848.13 | ||||
As shown above, the five year investment result worked out well, with an annualized rate of return of 5.14%. This would have turned a $10K investment made 5 years ago into $12,848.13 today (as of 01/15/2020). On a total return basis, that’s a result of 28.46% (something to think about: how might PSA shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Public Storage paid investors a total of $37.80/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 8/share, we calculate that PSA has a current yield of approximately 3.67%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 8 against the original $202.25/share purchase price. This works out to a yield on cost of 1.81%.
More investment wisdom to ponder:
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” — Benjamin Graham
