“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 twenty year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into UDR Inc (NYSE: UDR)? Today, we examine the outcome of a twenty year investment into the stock back in 2002.
| Start date: | 07/22/2002 |
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| End date: | 07/20/2022 | ||||
| Start price/share: | $14.08 | ||||
| End price/share: | $45.42 | ||||
| Starting shares: | 710.23 | ||||
| Ending shares: | 1,819.70 | ||||
| Dividends reinvested/share: | $24.00 | ||||
| Total return: | 726.51% | ||||
| Average annual return: | 11.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $82,604.36 | ||||
As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 11.13%. This would have turned a $10K investment made 20 years ago into $82,604.36 today (as of 07/20/2022). On a total return basis, that’s a result of 726.51% (something to think about: how might UDR shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that UDR Inc paid investors a total of $24.00/share in dividends over the 20 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 1.52/share, we calculate that UDR has a current yield of approximately 3.35%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.52 against the original $14.08/share purchase price. This works out to a yield on cost of 23.79%.
One more investment quote to leave you with:
“The older I get, the more I see a straight path where I want to go. If you’re going to hunt elephants, don’t get off the trail for a rabbit.” — T. Boone Pickens
