“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— 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 2003.
| Start date: | 11/14/2003 |
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| End date: | 11/13/2023 | ||||
| Start price/share: | $46.55 | ||||
| End price/share: | $51.21 | ||||
| Starting shares: | 214.82 | ||||
| Ending shares: | 506.57 | ||||
| Dividends reinvested/share: | $80.05 | ||||
| Total return: | 159.41% | ||||
| Average annual return: | 4.88% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,946.59 | ||||
The above analysis shows the two-decade investment result worked out as follows, with an annualized rate of return of 4.88%. This would have turned a $10K investment made 20 years ago into $25,946.59 today (as of 11/13/2023). On a total return basis, that’s a result of 159.41% (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 $80.05/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 7.65%. 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 $46.55/share purchase price. This works out to a yield on cost of 16.43%.
Another great investment quote to think about:
“Behind every stock is a company. Find out what it’s doing.” — Peter Lynch
