“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a five year holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into American Tower Corp (NYSE: AMT)? Today, we examine the outcome of a five year investment into the stock back in 2014.
| Start date: | 06/09/2014 |
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| End date: | 06/06/2019 | ||||
| Start price/share: | $89.66 | ||||
| End price/share: | $212.70 | ||||
| Starting shares: | 111.53 | ||||
| Ending shares: | 122.89 | ||||
| Dividends reinvested/share: | $11.73 | ||||
| Total return: | 161.39% | ||||
| Average annual return: | 21.21% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $26,135.72 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 21.21%. This would have turned a $10K investment made 5 years ago into $26,135.72 today (as of 06/06/2019). On a total return basis, that’s a result of 161.39% (something to think about: how might AMT shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that American Tower Corp paid investors a total of $11.73/share in dividends over the 5 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 3.68/share, we calculate that AMT has a current yield of approximately 1.73%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.68 against the original $89.66/share purchase price. This works out to a yield on cost of 1.93%.
More investment wisdom to ponder:
“If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.” — Peter Lynch
