“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
This inspiring quote from Warren Buffett teaches us the importance of considering our investment time horizon when approaching any given investment: Could we envision ourselves holding the stock we are considering for many years? Even a five year holding period potentially?
For “buy-and-hold” investors taking a long-term view, what’s important isn’t the short-term stock market fluctuations that will inevitably occur, but what happens over the long haul. Looking back 5 years to 2020, investors considering an investment into shares of AT&T Inc (NYSE: T) may have been pondering this very question and thinking about their potential investment result over a full five year time horizon. Here’s how that would have worked out.
| Start date: | 10/20/2020 |
|
|||
| End date: | 10/17/2025 | ||||
| Start price/share: | $20.21 | ||||
| End price/share: | $26.34 | ||||
| Starting shares: | 494.80 | ||||
| Ending shares: | 672.47 | ||||
| Dividends reinvested/share: | $6.13 | ||||
| Total return: | 77.13% | ||||
| Average annual return: | 12.13% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,714.82 | ||||
As shown above, the five year investment result worked out quite well, with an annualized rate of return of 12.13%. This would have turned a $10K investment made 5 years ago into $17,714.82 today (as of 10/17/2025). On a total return basis, that’s a result of 77.13% (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 $6.13/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 4.21%. 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 $20.21/share purchase price. This works out to a yield on cost of 20.83%.
One more investment quote to leave you with:
“A 10% decline in the market is fairly common, it happens about once a year. Investors who realize this are less likely to sell in a panic, and more likely to remain invested, benefitting from the wealthbuilding power of stocks.” — Christopher Davis
