“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Simon Property Group, Inc. (NYSE: SPG)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 03/22/2010 |
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| End date: | 03/19/2020 | ||||
| Start price/share: | $79.93 | ||||
| End price/share: | $55.74 | ||||
| Starting shares: | 125.11 | ||||
| Ending shares: | 179.23 | ||||
| Dividends reinvested/share: | $56.40 | ||||
| Total return: | -0.10% | ||||
| Average annual return: | -0.01% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,990.00 | ||||
As shown above, the ten year investment result worked out poorly, with an annualized rate of return of -0.01%. This would have turned a $10K investment made 10 years ago into $9,990.00 today (as of 03/19/2020). On a total return basis, that’s a result of -0.10% (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 $56.40/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 15.07%. 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 $79.93/share purchase price. This works out to a yield on cost of 18.85%.
Another great investment quote to think about:
“Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.” — Warren Buffett
