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“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 Simon Property Group, Inc. (NYSE: SPG)? Today, we examine the outcome of a five year investment into the stock back in 2015.
Start date: | 12/08/2015 |
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End date: | 12/07/2020 | ||||
Start price/share: | $187.96 | ||||
End price/share: | $89.37 | ||||
Starting shares: | 53.20 | ||||
Ending shares: | 66.90 | ||||
Dividends reinvested/share: | $34.55 | ||||
Total return: | -40.21% | ||||
Average annual return: | -9.77% | ||||
Starting investment: | $10,000.00 | ||||
Ending investment: | $5,979.05 |
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -9.77%. This would have turned a $10K investment made 5 years ago into $5,979.05 today (as of 12/07/2020). On a total return basis, that’s a result of -40.21% (something to think about: how might SPG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Simon Property Group, Inc. paid investors a total of $34.55/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 5.2/share, we calculate that SPG has a current yield of approximately 5.82%. 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 $187.96/share purchase price. This works out to a yield on cost of 3.10%.
Another great investment quote to think about:
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.” — Peter Lynch
SPG