“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
This oft-cited Buffett quote underscores the importance of considering an investor’s time horizon when approaching any given security. The underlying question is simple but demanding: can we realistically envision ourselves holding the stock we are considering for many years, potentially even for decades?
For investors who embrace a disciplined “buy-and-hold” approach, the primary focus is not on the inevitable short-term market fluctuations, but on what happens over the long haul as fundamentals, cash flows, and dividends compound over time.
Looking back 20 years to 2006, investors considering an investment in shares of Public Storage (NYSE: PSA) may have been asking that very question and wondering what a full twenty-year holding period might deliver. Below, we examine how such a long-term, dividend-reinvestment strategy would have worked out.
| Start date: | 03/16/2006 |
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| End date: | 03/13/2026 | ||||
| Start price/share: | $82.90 | ||||
| End price/share: | $297.72 | ||||
| Starting shares: | 120.63 | ||||
| Ending shares: | 242.66 | ||||
| Dividends reinvested/share: | $141.30 | ||||
| Total return: | 622.46% | ||||
| Average annual return: | 10.39% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $72,229.11 | ||||
As shown above, the twenty-year investment result worked out quite well, with an annualized rate of return of 10.39%. That hypothetical performance would have turned a $10,000 investment made 20 years ago into $72,229.11 today (as of 03/13/2026), assuming dividends were fully reinvested. On a total return basis, that represents a gain of 622.46%.
Over that period, investors in Public Storage also endured a series of market shocks — including the Global Financial Crisis of 2008–2009, the European sovereign debt crisis, the COVID-19 pandemic, and an aggressive interest-rate tightening cycle beginning in 2022. The long-run outcome nevertheless illustrates how a persistently profitable, dividend-paying REIT can reward patient capital across multiple market regimes.
Public Storage is one of the largest self-storage real estate investment trusts in the United States, with a nationwide portfolio of storage facilities and a business model that has historically proven resilient in a variety of economic backdrops. As a REIT, the company is obligated to distribute a substantial portion of its taxable income to shareholders in the form of dividends, which has made PSA a widely followed income vehicle within the listed real estate universe.
From a capital appreciation standpoint alone, PSA’s share price advanced from $82.90 at the start of the period to $297.72 at the end. However, the real power of the strategy lies in the reinvestment of dividends over time. With dividends reinvested, the initial 120.63 shares held in 2006 would have grown to 242.66 shares by March 2026 — almost exactly a doubling of the share count, even before considering price appreciation.
Many income-oriented investors are unwilling to own stocks that do not pay a dividend. In the case of Public Storage, shareholders received $141.30 per share in dividends over the 20 years examined in the exercise above. That stream of cash distributions accounted for a material portion of the total return and was an important driver of wealth creation when those dividends were reinvested.
For this analysis, we have assumed that all dividends were systematically reinvested — i.e., used to purchase additional shares of PSA through a dividend reinvestment plan (DRIP). The calculations rely on the closing share price on each ex-dividend date to determine how many fractional shares were acquired. Compounding then occurs not only through price appreciation, but also through the rising share count as each new dividend is paid on an expanding base of holdings.
Based upon the most recent annualized dividend rate of 12/share, we calculate that PSA has a current yield of approximately 4.03%. Another useful metric to examine is “yield on cost” — in other words, the current annualized dividend of 12 expressed against the original $82.90 per-share purchase price. This works out to a yield on cost of 4.86%, reflecting the benefit of having locked in a higher income return on the original capital deployed.
It is worth noting that the actual cash flow experience for investors who do not reinvest dividends would differ meaningfully from the scenario above. In that case, investors would have received the $141.30 per share in cash over the period, and their ending share count would have remained at 120.63. Total wealth would still have increased, but the portfolio value at the end date would reflect a combination of the appreciated principal and the cumulative cash distributions, rather than the larger share count derived from a DRIP approach.
The PSA example also illustrates the potential role of sector selection in a long-term portfolio. Self-storage assets, backed by large and diversified tenant bases, have historically exhibited relatively low volatility in cash flows, limited ongoing capital expenditure requirements compared with some other property types, and the ability to adjust rental rates over time. These characteristics have contributed to the capacity of large storage REITs to sustain and grow dividends throughout a range of macro environments.
Of course, past performance does not guarantee future results, and REITs remain sensitive to interest-rate cycles, capital-markets conditions, and property-market fundamentals. Nevertheless, the 2006–2026 period suggests that a long-term, income-focused investor who committed to Public Storage, reinvested dividends, and stayed the course through periods of volatility would have been well compensated for that patience.
For investors constructing long-term portfolios today, the PSA case study offers several practical takeaways:
- Compounding requires time; allowing a full market cycle or more can materially change outcomes versus shorter holding periods.
- Dividend reinvestment can be a powerful accelerator of total returns, particularly for businesses with durable cash flows.
- Yield on cost naturally rises over time if dividends grow faster than the original purchase price, enhancing the effective income return for long-term holders.
- Sector characteristics — in this case, the defensive profile of self-storage real estate — can influence the stability and growth of distributions over decades.
Ultimately, what the PSA experience highlights for investors is less about a single stock and more about the discipline of staying invested in quality, income-generating assets through multiple business cycles.
One more investment quote to leave you with:
“Waiting helps you as an investor and a lot of people just can’t stand to wait. If you didn’t get the deferred-gratification gene, you’ve got to work very hard to overcome that.” — Charlie Munger
[The performance figures and dividend reinvestment assumptions above were computed with the Dividend Channel DRIP Returns Calculator. As with any back-tested analysis, results are hypothetical and intended solely for illustrative purposes.]
