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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: 09/17/2015


End date: 09/16/2020
Start price/share: $26.04
End price/share: $11.00
Starting shares: 384.02
Ending shares: 615.75
Dividends reinvested/share: $8.77
Total return: -32.27%
Average annual return: -7.49%
Starting investment: $10,000.00
Ending investment: $6,774.09

As we can see, the five year investment result worked out poorly, with an annualized rate of return of -7.49%. This would have turned a $10K investment made 5 years ago into $6,774.09 today (as of 09/16/2020). On a total return basis, that’s a result of -32.27% (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 $8.77/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 9.09%. 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 $26.04/share purchase price. This works out to a yield on cost of 34.91%.

Another great investment quote to think about:
“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” — Benjamin Graham