“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 Essex Property Trust Inc (NYSE: ESS)? Today, we examine the outcome of a five year investment into the stock back in 2018.
| Start date: | 10/30/2018 |
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| End date: | 10/27/2023 | ||||
| Start price/share: | $255.64 | ||||
| End price/share: | $206.58 | ||||
| Starting shares: | 39.12 | ||||
| Ending shares: | 46.07 | ||||
| Dividends reinvested/share: | $42.06 | ||||
| Total return: | -4.82% | ||||
| Average annual return: | -0.98% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $9,520.02 | ||||
As shown above, the five year investment result worked out poorly, with an annualized rate of return of -0.98%. This would have turned a $10K investment made 5 years ago into $9,520.02 today (as of 10/27/2023). On a total return basis, that’s a result of -4.82% (something to think about: how might ESS shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Essex Property Trust Inc paid investors a total of $42.06/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 9.24/share, we calculate that ESS has a current yield of approximately 4.47%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 9.24 against the original $255.64/share purchase price. This works out to a yield on cost of 1.75%.
One more investment quote to leave you with:
“The stock market is a device to transfer money from the impatient to the patient.” — Warren Buffett
