“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a two-decade period?
Today, let’s look backwards in time to 2006, and take a look at what happened to investors who asked that very question about AvalonBay Communities, Inc. (NYSE: AVB), by taking a look at the investment outcome over a two-decade holding period.
| Start date: | 03/02/2006 |
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| End date: | 02/27/2026 | ||||
| Start price/share: | $102.29 | ||||
| End price/share: | $177.23 | ||||
| Starting shares: | 97.76 | ||||
| Ending shares: | 199.01 | ||||
| Dividends reinvested/share: | $102.94 | ||||
| Total return: | 252.71% | ||||
| Average annual return: | 6.50% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $35,248.61 | ||||
The above analysis shows the two-decade investment result worked out well, with an annualized rate of return of 6.50%. This would have turned a $10K investment made 20 years ago into $35,248.61 today (as of 02/27/2026). On a total return basis, that’s a result of 252.71% (something to think about: how might AVB shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AvalonBay Communities, Inc. paid investors a total of $102.94/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 7.12/share, we calculate that AVB has a current yield of approximately 4.02%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 7.12 against the original $102.29/share purchase price. This works out to a yield on cost of 3.93%.
Here’s one more great investment quote before you go:
“While some might mistakenly consider value investing a mechanical tool for identifying bargains, it is actually a comprehensive investment philosophy that emphasizes the need to perform in-depth fundamental analysis, pursue long-term investment results, limit risk, and resist crowd psychology.” — Seth Klarman
