“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. A key tenet of that approach is to own durable, cash-generating businesses through multiple economic and interest-rate cycles, rather than attempting to trade short-term moves.
How would such a strategy have worked out for an investment into Equity Residential (NYSE: EQR), one of the largest U.S. residential real estate investment trusts (REITs), focused primarily on high-quality multifamily properties in major coastal and gateway markets such as Boston, New York, Washington, D.C., Seattle, San Francisco, Southern California, and Denver? Below, we examine the outcome of a two-decade investment into the stock back in 2006, assuming dividends were reinvested throughout.
| Start date: | 03/20/2006 |
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| End date: | 03/18/2026 | ||||
| Start price/share: | $46.07 | ||||
| End price/share: | $59.85 | ||||
| Starting shares: | 217.06 | ||||
| Ending shares: | 526.75 | ||||
| Dividends reinvested/share: | $52.60 | ||||
| Total return: | 215.26% | ||||
| Average annual return: | 5.91% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $31,541.04 | ||||
As shown above, the two-decade investment result worked out well, with an annualized rate of return of 5.91%. This would have turned a $10K investment made 20 years ago into $31,541.04 today (as of 03/18/2026). On a total return basis, that is a result of 215.26%, achieved through a combination of price appreciation and substantial dividend income that was reinvested over time.
Importantly, this period spans a wide range of market environments: the 2007‑2009 Global Financial Crisis, an extended period of near-zero interest rates, the COVID‑19 pandemic and associated volatility in rental housing demand, and a sharp rise in interest rates beginning in 2022. The ability of a long-term holding to compound through such disruptive episodes illustrates the role that time in the market can play in mitigating short-term drawdowns and volatility. Something to think about: how might EQR shares perform over the next 20 years, as demographic trends and housing supply constraints continue to play out in the company’s core urban markets?
Dividends are always an important investment factor to consider, and Equity Residential has paid $52.60/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 powerful way for an investor to compound their returns, as each incremental share purchased via dividends in turn generates future dividends of its own.
In the case of EQR, the share count in this hypothetical investment increased from 217.06 shares at the start to 526.75 shares at the end of the period, entirely due to reinvested dividends. This illustrates how, over long holding periods, a meaningful portion of total return can come from income and the compounding effect of reinvestment, rather than from price moves alone. The above calculations are done with the assumption that dividends received over time are reinvested (the calculations use the closing price on ex-date), which is consistent with a systematic dividend reinvestment plan (DRIP).
Based upon the most recent annualized dividend rate of 2.77/share, we calculate that EQR has a current yield of approximately 4.63%. Another interesting data point we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.77 against the original $46.07/share purchase price. This works out to a yield on cost of 10.05%, highlighting how a consistent dividend payer can provide a growing income stream relative to the original capital committed, even if the current yield on the stock appears more modest to new investors at today’s price.
For context, Equity Residential is structured as a REIT and, under U.S. tax law, is generally required to distribute at least 90% of its taxable income to shareholders in the form of dividends. As a result, EQR typically pays out the majority of its funds from operations (FFO) or adjusted FFO, metrics that many analysts use in place of traditional earnings per share when assessing REIT cash generation. Over the last two decades, EQR has periodically adjusted its dividend to reflect changes in operating performance, its development pipeline, and the broader interest-rate environment, but it has remained a notable income vehicle for investors seeking exposure to institutional-quality multifamily real estate.
Of course, an investment in EQR over this period did not move in a straight line. The stock experienced significant drawdowns around the Global Financial Crisis, when real estate values and credit conditions deteriorated, and again during the initial phase of the COVID‑19 pandemic, when urban rental demand temporarily weakened in several of EQR’s core coastal markets. Nonetheless, a disciplined buy-and-hold investor who remained invested and reinvested dividends throughout those phases would have participated fully in the subsequent recoveries.
Looking ahead, investors considering EQR today will want to evaluate several key factors beyond the historical return profile: the company’s balance sheet and leverage metrics, its access to capital markets in a higher-rate environment, occupancy trends and rent growth across its portfolio, and its exposure to regulatory developments such as rent control or zoning constraints in certain municipalities. Demographic trends, including continued household formation and ongoing housing affordability challenges in major employment centers, will also play an important role in shaping the long-term opportunity set for owners of multifamily real estate.
Another great investment quote to think about:
“Though tempting, trying to time the market is a loser’s game.” — Christopher Davis
For investors focused on income and total return, the EQR example underscores several themes often emphasized by long-term, fundamentals-driven investors: the value of staying invested through cycles, the contribution of dividends to wealth creation, and the compounding benefit of a disciplined reinvestment policy. While past performance does not guarantee future results and individual circumstances differ, a systematic, long-horizon approach has historically been a robust framework for participating in the cash flows generated by high-quality real estate platforms such as Equity Residential.
