“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon, where a two-decade holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into AT&T Inc (NYSE: T)? Today, we examine the outcome of a two-decade investment into the stock back in 1999.
| Start date: | 09/13/1999 |
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| End date: | 09/10/2019 | ||||
| Start price/share: | $97.74 | ||||
| End price/share: | $37.58 | ||||
| Starting shares: | 102.31 | ||||
| Ending shares: | 270.39 | ||||
| Dividends reinvested/share: | $34.21 | ||||
| Total return: | 1.61% | ||||
| Average annual return: | 0.08% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,161.27 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 0.08%. This would have turned a $10K investment made 20 years ago into $10,161.27 today (as of 09/10/2019). On a total return basis, that’s a result of 1.61% (something to think about: how might T shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AT&T Inc paid investors a total of $34.21/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 2.04/share, we calculate that T has a current yield of approximately 5.43%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.04 against the original $97.74/share purchase price. This works out to a yield on cost of 5.56%.
Here’s one more great investment quote before you go:
“All intelligent investing is value investing: acquiring more that you are paying for. You must value the business in order to value the stock.” — Charlie Munger
