“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 two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Boston Properties Inc (NYSE: BXP)? Today, we examine the outcome of a two-decade investment into the stock back in 2002.
| Start date: | 03/25/2002 |
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| End date: | 03/22/2022 | ||||
| Start price/share: | $39.48 | ||||
| End price/share: | $125.42 | ||||
| Starting shares: | 253.29 | ||||
| Ending shares: | 603.01 | ||||
| Dividends reinvested/share: | $77.47 | ||||
| Total return: | 656.29% | ||||
| Average annual return: | 10.64% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $75,572.48 | ||||
As we can see, the two-decade investment result worked out quite well, with an annualized rate of return of 10.64%. This would have turned a $10K investment made 20 years ago into $75,572.48 today (as of 03/22/2022). On a total return basis, that’s a result of 656.29% (something to think about: how might BXP shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Boston Properties Inc paid investors a total of $77.47/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 3.92/share, we calculate that BXP has a current yield of approximately 3.13%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.92 against the original $39.48/share purchase price. This works out to a yield on cost of 7.93%.
One more piece of investment wisdom to leave you with:
“Value investing means really asking what are the best values, and not assuming that because something looks expensive that it is, or assuming that because a stock is down in price and trades at low multiples that it is a bargain.” — Bill Miller
