“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 two-decade 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 two-decade investment into the stock back in 2002.
| Start date: | 12/20/2002 |
|
|||
| End date: | 12/19/2022 | ||||
| Start price/share: | $21.31 | ||||
| End price/share: | $17.86 | ||||
| Starting shares: | 469.26 | ||||
| Ending shares: | 1,422.35 | ||||
| Dividends reinvested/share: | $25.90 | ||||
| Total return: | 154.03% | ||||
| Average annual return: | 4.77% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $25,407.43 | ||||
As we can see, the two-decade investment result worked out as follows, with an annualized rate of return of 4.77%. This would have turned a $10K investment made 20 years ago into $25,407.43 today (as of 12/19/2022). On a total return basis, that’s a result of 154.03% (something to think about: how might T shares perform over the next 20 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that AT&T Inc paid investors a total of $25.90/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 1.11/share, we calculate that T has a current yield of approximately 6.21%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 1.11 against the original $21.31/share purchase price. This works out to a yield on cost of 29.14%.
One more investment quote to leave you with:
“I’d like to live as a poor man with lots of money.” — Pablo Picasso
