“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 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 American Tower Corp (NYSE: AMT)? Today, we examine the outcome of a twenty year investment into the stock back in 2001.
|Average annual return:||11.32%|
As we can see, the twenty year investment result worked out quite well, with an annualized rate of return of 11.32%. This would have turned a $10K investment made 20 years ago into $85,451.39 today (as of 02/19/2021). On a total return basis, that’s a result of 754.59% (something to think about: how might AMT shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that American Tower Corp paid investors a total of $21.81/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 4.84/share, we calculate that AMT has a current yield of approximately 2.14%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 4.84 against the original $31.27/share purchase price. This works out to a yield on cost of 6.84%.
One more investment quote to leave you with:
“Taking risks is really the only way to consistently achieve above-average returns.” — Sam Zell