“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 2013.
| Start date: | 05/13/2013 |
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| End date: | 05/10/2023 | ||||
| Start price/share: | $27.95 | ||||
| End price/share: | $17.04 | ||||
| Starting shares: | 357.78 | ||||
| Ending shares: | 641.68 | ||||
| Dividends reinvested/share: | $14.40 | ||||
| Total return: | 9.34% | ||||
| Average annual return: | 0.90% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $10,937.07 | ||||
As shown above, the decade-long investment result worked out as follows, with an annualized rate of return of 0.90%. This would have turned a $10K investment made 10 years ago into $10,937.07 today (as of 05/10/2023). On a total return basis, that’s a result of 9.34% (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 $14.40/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 1.11/share, we calculate that T has a current yield of approximately 6.51%. 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 $27.95/share purchase price. This works out to a yield on cost of 23.29%.
Here’s one more great investment quote before you go:
“In investing, what is comfortable is rarely profitable.” — Robert Arnott
