“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a ten year period?
Today, let’s look backwards in time to 2014, and take a look at what happened to investors who asked that very question about Prologis Inc (NYSE: PLD), by taking a look at the investment outcome over a ten year holding period.
| Start date: | 01/27/2014 |
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| End date: | 01/25/2024 | ||||
| Start price/share: | $36.51 | ||||
| End price/share: | $126.20 | ||||
| Starting shares: | 273.90 | ||||
| Ending shares: | 365.68 | ||||
| Dividends reinvested/share: | $21.80 | ||||
| Total return: | 361.49% | ||||
| Average annual return: | 16.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $46,132.26 | ||||
As we can see, the ten year investment result worked out exceptionally well, with an annualized rate of return of 16.52%. This would have turned a $10K investment made 10 years ago into $46,132.26 today (as of 01/25/2024). On a total return basis, that’s a result of 361.49% (something to think about: how might PLD shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Prologis Inc paid investors a total of $21.80/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 3.48/share, we calculate that PLD has a current yield of approximately 2.76%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.48 against the original $36.51/share purchase price. This works out to a yield on cost of 7.56%.
Here’s one more great investment quote before you go:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton
