“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Prologis Inc (NYSE: PLD)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 11/03/2000 |
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| End date: | 11/02/2020 | ||||
| Start price/share: | $23.25 | ||||
| End price/share: | $101.87 | ||||
| Starting shares: | 430.11 | ||||
| Ending shares: | 942.46 | ||||
| Dividends reinvested/share: | $31.77 | ||||
| Total return: | 860.08% | ||||
| Average annual return: | 11.97% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $96,066.43 | ||||
As shown above, the twenty year investment result worked out quite well, with an annualized rate of return of 11.97%. This would have turned a $10K investment made 20 years ago into $96,066.43 today (as of 11/02/2020). On a total return basis, that’s a result of 860.08% (something to think about: how might PLD shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Prologis Inc paid investors a total of $31.77/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 2.32/share, we calculate that PLD has a current yield of approximately 2.28%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.32 against the original $23.25/share purchase price. This works out to a yield on cost of 9.81%.
Another great investment quote to think about:
“The greater the passive income you can build, the freer you will become.” — Todd Fleming
