Photo credit:

“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 AT&T Inc (NYSE: T)? Today, we examine the outcome of a five year investment into the stock back in 2018.

Start date: 01/03/2018


End date: 12/30/2022
Start price/share: $28.44
End price/share: $18.41
Starting shares: 351.62
Ending shares: 485.41
Dividends reinvested/share: $7.42
Total return: -10.64%
Average annual return: -2.23%
Starting investment: $10,000.00
Ending investment: $8,935.29

As shown above, the five year investment result worked out poorly, with an annualized rate of return of -2.23%. This would have turned a $10K investment made 5 years ago into $8,935.29 today (as of 12/30/2022). On a total return basis, that’s a result of -10.64% (something to think about: how might T shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

Notice that AT&T Inc paid investors a total of $7.42/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 1.11/share, we calculate that T has a current yield of approximately 6.03%. 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 $28.44/share purchase price. This works out to a yield on cost of 21.20%.

One more investment quote to leave you with:
“Sentimentality about an investments leads to lack of discipline.” — Sam Zell