“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 Realty Income Corp (NYSE: O)? Today, we examine the outcome of a two-decade investment into the stock back in 2004.
| Start date: | 02/17/2004 |
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| End date: | 02/14/2024 | ||||
| Start price/share: | $20.77 | ||||
| End price/share: | $51.39 | ||||
| Starting shares: | 481.46 | ||||
| Ending shares: | 1,348.31 | ||||
| Dividends reinvested/share: | $41.91 | ||||
| Total return: | 592.90% | ||||
| Average annual return: | 10.16% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $69,296.10 | ||||
As shown above, the two-decade investment result worked out quite well, with an annualized rate of return of 10.16%. This would have turned a $10K investment made 20 years ago into $69,296.10 today (as of 02/14/2024). On a total return basis, that’s a result of 592.90% (something to think about: how might O shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividends are always an important investment factor to consider, and Realty Income Corp has paid $41.91/share in dividends to shareholders over the past 20 years we looked at above. Many an investor will only invest in stocks that pay dividends, so this component of total return is always an important consideration. Automated reinvestment of dividends into additional shares of stock can be a great way for an investor to compound their returns. The above calculations are done with the assuption that dividends received over time are reinvested (the calcuations use the closing price on ex-date).
Based upon the most recent annualized dividend rate of 3.078/share, we calculate that O has a current yield of approximately 5.99%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.078 against the original $20.77/share purchase price. This works out to a yield on cost of 28.84%.
Here’s one more great investment quote before you go:
“Buy not on optimism, but on arithmetic.” — Benjamin Graham
