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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 2018.

Start date: 05/21/2018
$10,000

05/21/2018
  $8,731

05/18/2023
End date: 05/18/2023
Start price/share: $157.04
End price/share: $105.54
Starting shares: 63.68
Ending shares: 82.74
Dividends reinvested/share: $32.85
Total return: -12.68%
Average annual return: -2.68%
Starting investment: $10,000.00
Ending investment: $8,731.22

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -2.68%. This would have turned a $10K investment made 5 years ago into $8,731.22 today (as of 05/18/2023). On a total return basis, that’s a result of -12.68% (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 $32.85/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 7.4/share, we calculate that SPG has a current yield of approximately 7.01%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 7.4 against the original $157.04/share purchase price. This works out to a yield on cost of 4.46%.

More investment wisdom to ponder:
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” — Charlie Munger