“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year holding period is a useful test of whether a stock has delivered returns through both market valuation changes and cash distributions. For AvalonBay Communities, Inc. (NYSE: AVB), the result over the five years from May 28, 2021 to May 27, 2026 was positive, but modest. The shares declined over the period, and total return depended largely on the contribution from reinvested dividends.
AVB 5-Year Return at a Glance
| Start date: | 05/28/2021 |
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| End date: | 05/27/2026 | ||||
| Start price/share: | $206.94 | ||||
| End price/share: | $186.23 | ||||
| Starting shares: | 48.32 | ||||
| Ending shares: | 57.26 | ||||
| Dividends reinvested/share: | $33.31 | ||||
| Total return: | 6.63% | ||||
| Average annual return: | 1.29% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,661.86 | ||||
An initial $10,000 investment in AVB on 05/28/2021 would have grown to $10,661.86 by 05/27/2026, assuming all dividends were reinvested. That equates to a 6.63% cumulative total return and a 1.29% annualized return. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
What Drove AVB’s Five-Year Return?
The key point is that AVB’s total return materially exceeded its price return. The stock price fell from $206.94 to $186.23 over the period, a decline of roughly 10%. Yet the overall investment still produced a positive result because dividend income offset the share price weakness and, through reinvestment, increased the share count from 48.32 to 57.26.
That distinction matters in evaluating real estate investment trusts. For many REITs, income is a substantial part of the investment case, and AVB is no exception. Looking only at the beginning and ending stock price would understate the actual economic outcome for a holder who collected and reinvested distributions.
In simple terms, AVB’s five-year return came from three factors:
- Share price movement: negative over the period.
- Cash dividends paid: meaningful support to total return.
- Dividend reinvestment: additional shares acquired over time amplified the income contribution.
How Dividend Reinvestment Changed the Outcome
Over the five years examined here, AVB paid $33.31 per share in dividends that were assumed to be reinvested. Under that assumption, each distribution purchased additional shares at the closing price on the ex-dividend date. This is what turned a declining share price into a positive total-return result.
Without reinvestment, the investment outcome would still reflect the cash received, but the ending share count would not have increased. With reinvestment, the investor finished the period owning nearly 19% more shares than at the start, which improved the ending value and increased the income base going forward.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $7.12 per share, AVB has a current yield of approximately 3.82% using the ending share price of $186.23. That provides a useful snapshot of the stock’s income rate at the current market value.
Another way to frame the income stream is yield on cost, which compares the current annualized dividend with the original purchase price. Using the $206.94 starting price, the implied yield on cost is about 3.44%. That figure is distinct from current yield: current yield measures income relative to today’s share price, while yield on cost measures income relative to the original entry price.
Quick definitions:
- Current yield: annual dividend divided by the current share price.
- Yield on cost: current annual dividend divided by the original purchase price.
- Total return: price change plus dividends, including the effect of reinvestment if applicable.
How to Interpret the Result
A 6.63% five-year total return is positive, but it is not especially strong for a period that included meaningful inflation, interest-rate volatility, and large shifts in REIT valuations. For AVB, this particular holding window shows how a high-quality dividend payer can preserve a positive total return even when the stock does not generate capital appreciation.
It also highlights a broader point about listed apartment REITs. Operating performance, property-level cash flow, interest rates, capitalization rates, development economics, and valuation multiples can all influence shareholder returns. Even when underlying rental housing demand remains resilient, changes in financing costs and market-required yields can weigh on share prices.
That is why total return analysis is more informative than price performance alone. For AVB over this five-year stretch, the dividend stream did most of the heavy lifting.
“I learned early that there is nothing new in Wall Street. There can’t be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again. I’ve never forgotten that.” — Jesse Livermore
