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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The wisdom of Warren Buffett reflects a value-based philosophy about investing that says investors are buying shares in a business, and encourages strategic thinking about investment time horizon. Before placing a buy order for a stock, a great question we can ask is whether we would still be comfortable making the investment if we couldn’t sell it for many years?

A “buy-and-hold” approach may call for a time horizon that spans a long period of time — maybe even lasting for a ten year holding period. Suppose such a “buy-and-hold” investor had looked into buying shares of Mid-America Apartment Communities Inc (NYSE: MAA) back in 2014. Let’s take a look at how such an investment would have worked out for that buy-and-hold investor:

Start date: 02/05/2014


End date: 02/02/2024
Start price/share: $64.76
End price/share: $128.00
Starting shares: 154.42
Ending shares: 218.22
Dividends reinvested/share: $39.41
Total return: 179.32%
Average annual return: 10.82%
Starting investment: $10,000.00
Ending investment: $27,929.25

As we can see, the ten year investment result worked out quite well, with an annualized rate of return of 10.82%. This would have turned a $10K investment made 10 years ago into $27,929.25 today (as of 02/02/2024). On a total return basis, that’s a result of 179.32% (something to think about: how might MAA shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Mid-America Apartment Communities Inc paid investors a total of $39.41/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 5.88/share, we calculate that MAA has a current yield of approximately 4.59%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.88 against the original $64.76/share purchase price. This works out to a yield on cost of 7.09%.

One more piece of investment wisdom to leave you with:
“When you sell in desperation, you always sell cheap.” — Peter Lynch