“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 Atmos Energy Corp. (NYSE: ATO)? Today, we examine the outcome of a twenty year investment into the stock back in 2000.
| Start date: | 01/07/2000 |
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| End date: | 01/06/2020 | ||||
| Start price/share: | $20.06 | ||||
| End price/share: | $110.96 | ||||
| Starting shares: | 498.44 | ||||
| Ending shares: | 1,118.29 | ||||
| Dividends reinvested/share: | $28.63 | ||||
| Total return: | 1,140.85% | ||||
| Average annual return: | 13.41% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $124,058.33 | ||||
The above analysis shows the twenty year investment result worked out quite well, with an annualized rate of return of 13.41%. This would have turned a $10K investment made 20 years ago into $124,058.33 today (as of 01/06/2020). On a total return basis, that’s a result of 1,140.85% (something to think about: how might ATO shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Atmos Energy Corp. paid investors a total of $28.63/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 2.3/share, we calculate that ATO has a current yield of approximately 2.07%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.3 against the original $20.06/share purchase price. This works out to a yield on cost of 10.32%.
Another great investment quote to think about:
“The individual investor should act consistently as an investor and not as a speculator.” — Benjamin Graham
