“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The investment philosophy practiced by Warren Buffett calls for investors to take a long-term horizon when making an investment, such as a decade-long holding period (or even longer), and reconsider making the investment in the first place if unable to envision holding the stock for at least five years. Today, we look at how such a long-term strategy would have done for investors in Alexandria Real Estate Equities Inc (NYSE: ARE) back in 2014, holding through to today.
| Start date: | 07/30/2014 |
|
|||
| End date: | 07/29/2024 | ||||
| Start price/share: | $78.48 | ||||
| End price/share: | $117.42 | ||||
| Starting shares: | 127.42 | ||||
| Ending shares: | 174.32 | ||||
| Dividends reinvested/share: | $39.89 | ||||
| Total return: | 104.68% | ||||
| Average annual return: | 7.42% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,465.47 | ||||
As we can see, the decade-long investment result worked out well, with an annualized rate of return of 7.42%. This would have turned a $10K investment made 10 years ago into $20,465.47 today (as of 07/29/2024). On a total return basis, that’s a result of 104.68% (something to think about: how might ARE shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Many investors out there refuse to own any stock that lacks a dividend; in the case of Alexandria Real Estate Equities Inc, investors have received $39.89/share in dividends these past 10 years examined in the exercise above. This means total return was driven not just by share price, but also by the dividends received (and what the investor did with those dividends). For this exercise, what we’ve done with the dividends is to assume they are reinvestted — i.e. used to purchase additional shares (the calculations use closing price on ex-date).
Based upon the most recent annualized dividend rate of 5.2/share, we calculate that ARE has a current yield of approximately 4.43%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 5.2 against the original $78.48/share purchase price. This works out to a yield on cost of 5.64%.
One more investment quote to leave you with:
“If you have more than 120 or 130 I.Q. points, you can afford to give the rest away. You don’t need extraordinary intelligence to succeed as an investor.” — Warren Buffett
