“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 AT&T Inc (NYSE: T)? Today, we examine the outcome of a decade-long investment into the stock back in 2011.
| Start date: | 10/28/2011 |
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| End date: | 10/27/2021 | ||||
| Start price/share: | $29.74 | ||||
| End price/share: | $25.06 | ||||
| Starting shares: | 336.25 | ||||
| Ending shares: | 593.51 | ||||
| Dividends reinvested/share: | $19.36 | ||||
| Total return: | 48.73% | ||||
| Average annual return: | 4.05% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,877.00 | ||||
The above analysis shows the decade-long investment result worked out as follows, with an annualized rate of return of 4.05%. This would have turned a $10K investment made 10 years ago into $14,877.00 today (as of 10/27/2021). On a total return basis, that’s a result of 48.73% (something to think about: how might T shares perform over the next 10 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AT&T Inc paid investors a total of $19.36/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 2.08/share, we calculate that T has a current yield of approximately 8.30%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 2.08 against the original $29.74/share purchase price. This works out to a yield on cost of 27.91%.
One more piece of investment wisdom to leave you with:
“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.” — Peter Lynch
