“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 Boston Properties Inc (NYSE: BXP)? Today, we examine the outcome of a ten year investment into the stock back in 2010.
| Start date: | 08/25/2010 |
|
|||
| End date: | 08/24/2020 | ||||
| Start price/share: | $81.39 | ||||
| End price/share: | $87.13 | ||||
| Starting shares: | 122.87 | ||||
| Ending shares: | 167.79 | ||||
| Dividends reinvested/share: | $36.19 | ||||
| Total return: | 46.19% | ||||
| Average annual return: | 3.87% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,621.49 | ||||
As we can see, the ten year investment result worked out as follows, with an annualized rate of return of 3.87%. This would have turned a $10K investment made 10 years ago into $14,621.49 today (as of 08/24/2020). On a total return basis, that’s a result of 46.19% (something to think about: how might BXP shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Boston Properties Inc paid investors a total of $36.19/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 3.92/share, we calculate that BXP has a current yield of approximately 4.50%. 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 $81.39/share purchase price. This works out to a yield on cost of 5.53%.
More investment wisdom to ponder:
“The function of economic forecasting is to make astrology look respectable.” — John Galbraith
