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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 UDR Inc (NYSE: UDR)? Today, we examine the outcome of a five year investment into the stock back in 2016.

Start date: 01/05/2016


End date: 01/04/2021
Start price/share: $37.44
End price/share: $36.85
Starting shares: 267.09
Ending shares: 315.28
Dividends reinvested/share: $6.44
Total return: 16.18%
Average annual return: 3.04%
Starting investment: $10,000.00
Ending investment: $11,616.22

As shown above, the five year investment result worked out as follows, with an annualized rate of return of 3.04%. This would have turned a $10K investment made 5 years ago into $11,616.22 today (as of 01/04/2021). On a total return basis, that’s a result of 16.18% (something to think about: how might UDR shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that UDR Inc paid investors a total of $6.44/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 1.44/share, we calculate that UDR has a current yield of approximately 3.91%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.44 against the original $37.44/share purchase price. This works out to a yield on cost of 10.44%.

One more piece of investment wisdom to leave you with:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham