“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 2013.
|Average annual return:||-13.75%|
As shown above, the decade-long investment result worked out poorly, with an annualized rate of return of -13.75%. This would have turned a $10K investment made 10 years ago into $2,279.12 today (as of 02/24/2023). On a total return basis, that’s a result of -77.20% (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 $16.46/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 28.09%. 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 $34.51/share purchase price. This works out to a yield on cost of 81.40%.
One more investment quote to leave you with:
“The most important three words in investing is: â€œI don’t know.â€ If someone doesn’t say that to you then they are lying.” — James Altucher