“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— 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 ten year period?
Today, let’s look backwards in time to 2010, and take a look at what happened to investors who asked that very question about Boston Properties Inc (NYSE: BXP), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 11/26/2010 |
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| End date: | 11/24/2020 | ||||
| Start price/share: | $84.33 | ||||
| End price/share: | $104.43 | ||||
| Starting shares: | 118.58 | ||||
| Ending shares: | 162.95 | ||||
| Dividends reinvested/share: | $36.67 | ||||
| Total return: | 70.17% | ||||
| Average annual return: | 5.46% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,019.27 | ||||
As shown above, the ten year investment result worked out well, with an annualized rate of return of 5.46%. This would have turned a $10K investment made 10 years ago into $17,019.27 today (as of 11/24/2020). On a total return basis, that’s a result of 70.17% (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 $36.67/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 3.75%. 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 $84.33/share purchase price. This works out to a yield on cost of 4.45%.
Another great investment quote to think about:
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.” — Peter Lynch
