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“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 CenturyLink Inc (NYSE: CTL)? Today, we examine the outcome of a five year investment into the stock back in 2015.

Start date: 08/13/2015


End date: 08/12/2020
Start price/share: $27.97
End price/share: $10.79
Starting shares: 357.53
Ending shares: 571.81
Dividends reinvested/share: $9.06
Total return: -38.30%
Average annual return: -9.20%
Starting investment: $10,000.00
Ending investment: $6,170.42

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -9.20%. This would have turned a $10K investment made 5 years ago into $6,170.42 today (as of 08/12/2020). On a total return basis, that’s a result of -38.30% (something to think about: how might CTL shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that CenturyLink Inc paid investors a total of $9.06/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 1/share, we calculate that CTL has a current yield of approximately 9.27%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1 against the original $27.97/share purchase price. This works out to a yield on cost of 33.14%.

One more investment quote to leave you with:
“Don’t look for the needle in the haystack, just buy the haystack.” — John Bogle