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“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 Boston Properties Inc (NYSE: BXP)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 07/09/2015


End date: 07/08/2020
Start price/share: $123.12
End price/share: $87.58
Starting shares: 81.22
Ending shares: 93.85
Dividends reinvested/share: $17.59
Total return: -17.80%
Average annual return: -3.84%
Starting investment: $10,000.00
Ending investment: $8,221.02

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -3.84%. This would have turned a $10K investment made 5 years ago into $8,221.02 today (as of 07/08/2020). On a total return basis, that’s a result of -17.80% (something to think about: how might BXP shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Boston Properties Inc paid investors a total of $17.59/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 3.92/share, we calculate that BXP has a current yield of approximately 4.48%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.92 against the original $123.12/share purchase price. This works out to a yield on cost of 3.64%.

More investment wisdom to ponder:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman