“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 Extra Space Storage Inc (NYSE: EXR)? Today, we examine the outcome of a five year investment into the stock back in 2015.
| Start date: | 11/12/2015 |
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| End date: | 11/11/2020 | ||||
| Start price/share: | $79.08 | ||||
| End price/share: | $117.99 | ||||
| Starting shares: | 126.45 | ||||
| Ending shares: | 151.27 | ||||
| Dividends reinvested/share: | $16.26 | ||||
| Total return: | 78.49% | ||||
| Average annual return: | 12.28% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,850.48 | ||||
As we can see, the five year investment result worked out quite well, with an annualized rate of return of 12.28%. This would have turned a $10K investment made 5 years ago into $17,850.48 today (as of 11/11/2020). On a total return basis, that’s a result of 78.49% (something to think about: how might EXR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Extra Space Storage Inc paid investors a total of $16.26/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 3.6/share, we calculate that EXR has a current yield of approximately 3.05%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.6 against the original $79.08/share purchase price. This works out to a yield on cost of 3.86%.
One more piece of investment wisdom to leave you with:
“Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” — Albert Einstein
