“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The above quote from Warren Buffett is timeless, and brings into focus the choice about time horizon that any investor should think about before buying a stock they are considering. Behind every stock is an actual business; what will that business look like over a twenty year period?
Today, let’s look backwards in time to 2005, and take a look at what happened to investors who asked that very question about AT&T Inc (NYSE: T), by taking a look at the investment outcome over a twenty year holding period.
| Start date: | 03/21/2005 |
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| End date: | 03/19/2025 | ||||
| Start price/share: | $17.53 | ||||
| End price/share: | $26.84 | ||||
| Starting shares: | 570.45 | ||||
| Ending shares: | 1,765.28 | ||||
| Dividends reinvested/share: | $26.18 | ||||
| Total return: | 373.80% | ||||
| Average annual return: | 8.09% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $47,412.78 | ||||
As we can see, the twenty year investment result worked out well, with an annualized rate of return of 8.09%. This would have turned a $10K investment made 20 years ago into $47,412.78 today (as of 03/19/2025). On a total return basis, that’s a result of 373.80% (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 $26.18/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 4.14%. 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 $17.53/share purchase price. This works out to a yield on cost of 23.62%.
Here’s one more great investment quote before you go:
“All the opportunity in the world means nothing if you don’t actually pull the trigger.” — Sam Zell
