“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a two-decade holding period for an investor who was considering Kimco Realty Corp (NYSE: KIM) back in 2001, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 02/05/2001 |
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| End date: | 02/02/2021 | ||||
| Start price/share: | $14.43 | ||||
| End price/share: | $16.29 | ||||
| Starting shares: | 693.00 | ||||
| Ending shares: | 1,881.15 | ||||
| Dividends reinvested/share: | $20.68 | ||||
| Total return: | 206.44% | ||||
| Average annual return: | 5.76% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $30,659.29 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 5.76%. This would have turned a $10K investment made 20 years ago into $30,659.29 today (as of 02/02/2021). On a total return basis, that’s a result of 206.44% (something to think about: how might KIM shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Kimco Realty Corp paid investors a total of $20.68/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 .64/share, we calculate that KIM has a current yield of approximately 3.93%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of .64 against the original $14.43/share purchase price. This works out to a yield on cost of 27.23%.
Here’s one more great investment quote before you go:
“There’s a virtuous cycle when people have to defend challenges to their ideas. Any gaps in thinking or analysis become clear pretty quickly when smart people ask good, logical questions.” — Joel Greenblatt
