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“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

— Warren Buffett

The Warren Buffett investment philosophy calls for a long-term investment horizon, where a decade-long holding period, or even longer, would fit right into the strategy. How would such a strategy have worked out for an investment into Lumen Technologies Inc (NYSE: LUMN)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.

Start date: 06/07/2011


End date: 06/04/2021
Start price/share: $40.34
End price/share: $14.75
Starting shares: 247.89
Ending shares: 563.03
Dividends reinvested/share: $19.81
Total return: -16.95%
Average annual return: -1.84%
Starting investment: $10,000.00
Ending investment: $8,305.11

As we can see, the decade-long investment result worked out poorly, with an annualized rate of return of -1.84%. This would have turned a $10K investment made 10 years ago into $8,305.11 today (as of 06/04/2021). On a total return basis, that’s a result of -16.95% (something to think about: how might LUMN shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that Lumen Technologies Inc paid investors a total of $19.81/share in dividends over the 10 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 LUMN has a current yield of approximately 6.78%. 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 $40.34/share purchase price. This works out to a yield on cost of 16.81%.

One more investment quote to leave you with:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott