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“Someone’s sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?

Today, let’s look backwards in time to 2000, and take a look at what happened to investors who asked that very question about Simon Property Group, Inc. (NYSE: SPG), by taking a look at the investment outcome over a twenty year holding period.

Start date: 07/31/2000


End date: 07/29/2020
Start price/share: $24.25
End price/share: $65.59
Starting shares: 412.37
Ending shares: 986.89
Dividends reinvested/share: $81.29
Total return: 547.30%
Average annual return: 9.78%
Starting investment: $10,000.00
Ending investment: $64,684.11

As we can see, the twenty year investment result worked out well, with an annualized rate of return of 9.78%. This would have turned a $10K investment made 20 years ago into $64,684.11 today (as of 07/29/2020). On a total return basis, that’s a result of 547.30% (something to think about: how might SPG shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Simon Property Group, Inc. paid investors a total of $81.29/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 5.2/share, we calculate that SPG has a current yield of approximately 7.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.2 against the original $24.25/share purchase price. This works out to a yield on cost of 32.70%.

Another great investment quote to think about:
“We don’t have to be smarter than the rest. We have to be more disciplined than the rest.” — Warren Buffett