Photo credit: commons.wikimedia.org

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a ten year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Digital Realty Trust Inc (NYSE: DLR)? Today, we examine the outcome of a ten year investment into the stock back in 2012.

Start date: 03/21/2012
$10,000

03/21/2012
$28,849

03/18/2022
End date: 03/18/2022
Start price/share: $72.48
End price/share: $138.99
Starting shares: 137.97
Ending shares: 207.59
Dividends reinvested/share: $37.97
Total return: 188.53%
Average annual return: 11.18%
Starting investment: $10,000.00
Ending investment: $28,849.65

The above analysis shows the ten year investment result worked out quite well, with an annualized rate of return of 11.18%. This would have turned a $10K investment made 10 years ago into $28,849.65 today (as of 03/18/2022). On a total return basis, that’s a result of 188.53% (something to think about: how might DLR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Digital Realty Trust Inc paid investors a total of $37.97/share in dividends over the 10 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 4.88/share, we calculate that DLR has a current yield of approximately 3.51%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.88 against the original $72.48/share purchase price. This works out to a yield on cost of 4.84%.

Here’s one more great investment quote before you go:
“Sometimes buying early on the way down looks like being wrong, but it isn’t.” — Seth Klarman