“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Digital Realty Trust Inc (NYSE: DLR)? Today, we examine the outcome of a decade-long investment into the stock back in 2014.
| Start date: | 07/28/2014 |
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| End date: | 07/25/2024 | ||||
| Start price/share: | $63.49 | ||||
| End price/share: | $147.37 | ||||
| Starting shares: | 157.51 | ||||
| Ending shares: | 230.65 | ||||
| Dividends reinvested/share: | $41.98 | ||||
| Total return: | 239.91% | ||||
| Average annual return: | 13.02% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $34,005.80 | ||||
As shown above, the decade-long investment result worked out quite well, with an annualized rate of return of 13.02%. This would have turned a $10K investment made 10 years ago into $34,005.80 today (as of 07/25/2024). On a total return basis, that’s a result of 239.91% (something to think about: how might DLR shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Digital Realty Trust Inc paid investors a total of $41.98/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 4.88/share, we calculate that DLR has a current yield of approximately 3.31%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.88 against the original $63.49/share purchase price. This works out to a yield on cost of 5.21%.
Here’s one more great investment quote before you go:
“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” — Robert Allen
