“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A key lesson investors can draw from Warren Buffett is how to evaluate a potential stock purchase within a genuinely long-term time horizon. In practice, every shareholder faces a choice: focus on the short-term volatility that is a permanent feature of public markets, or identify businesses they are comfortable owning over multi-year periods, regardless of short-run price swings.
In the latter case, investors are effectively committing to a buy-and-hold discipline, often with an explicit holding period of five years or more. In doing so, the emphasis shifts from trading around price moves to assessing fundamentals such as earnings power, capital strength, and dividend sustainability.
Against that backdrop, we examine what would have happened over a five-year holding period if an investor had purchased shares of Principal Financial Group Inc (NASD: PFG) in March 2021 and held them through to March 2026, with dividends reinvested.
| Start date: | 03/12/2021 |
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| End date: | 03/11/2026 | ||||
| Start price/share: | $61.55 | ||||
| End price/share: | $88.20 | ||||
| Starting shares: | 162.47 | ||||
| Ending shares: | 194.41 | ||||
| Dividends reinvested/share: | $13.77 | ||||
| Total return: | 71.47% | ||||
| Average annual return: | 11.39% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,143.63 | ||||
Over this five-year period, the investment outcome was constructive. The annualized rate of return of 11.39% would have turned a $10,000 allocation made on 03/12/2021 into $17,143.63 as of 03/11/2026, assuming dividends were reinvested throughout. On a total return basis, that equates to 71.47%.
For context, that level of compounded return is broadly in line with what long-term equity investors often target in developed markets over a full cycle. It also illustrates a key implication of Buffett’s emphasis on time horizon: even moderate annual returns, when sustained and reinvested, can translate into meaningful capital growth over a five-year span.
As always, such backward-looking results do not guarantee future performance. However, they do provide a concrete case study in how a buy-and-hold approach can play out in a diversified financial services company such as Principal Financial Group, which derives revenues from insurance, retirement, and asset management activities and is therefore closely linked to both interest-rate trends and capital-market performance.
Dividend Reinvestment And Compounding
Dividends are an important driver of long-term equity returns, particularly in more mature, cash-generative sectors such as financials. Over the five-year window examined above, Principal Financial Group Inc distributed a total of $13.77 per share in dividends.
Many income-focused investors require a dividend as a condition of owning a stock, and that income component often becomes a critical anchor during periods of price volatility. Automated dividend reinvestment — commonly referred to as a dividend reinvestment plan, or DRIP — channels those cash payments back into additional shares, helping to compound returns over time.
In this case, reinvested dividends increased the share count from 162.47 at the start of the period to 194.41 by 03/11/2026. That incremental ownership means the investor participates more fully in any subsequent price appreciation and future dividends. The calculations above were prepared using the Dividend Channel DRIP Returns Calculator, which assumes dividends are reinvested at the closing price on the ex-dividend date.
Current Yield And Yield On Cost
Based on the most recent indicated annualized dividend rate of $3.20 per share, PFG currently offers a dividend yield of approximately 3.63%, using the recent $88.20 share price as the denominator. That places the stock above the yield available on the broad U.S. equity market, and within the range many income-oriented investors target for established financial companies.
Another way to frame the income profile is through the lens of yield on cost. Here, the current annualized dividend of $3.20 is compared against the original $61.55 purchase price from March 2021. On that basis, the investor’s yield on cost is approximately 5.90%.
Yield on cost is not a metric used in professional performance reporting, but it can be a useful internal gauge for long-term investors. It highlights how a combination of dividend growth and a favorable initial entry point can significantly enhance the effective income generated by the original capital deployed.
What The Five-Year Period Tells Long-Term Investors
The 2021‑2026 period encompassed an unusually wide range of market conditions, including a post-pandemic recovery phase, a sharp rise in inflation, one of the fastest Federal Reserve tightening cycles in decades, and pronounced volatility in both equity and fixed-income markets. Financial institutions such as Principal Financial Group were directly exposed to these developments through movements in interest rates, credit spreads, and asset valuations.
Against that backdrop, an 11.39% average annual total return highlights several themes relevant to long-horizon investors:
- Price appreciation from $61.55 to $88.20 per share contributed meaningfully to the outcome, but did not account for the entire return. Dividends and their reinvestment were integral components of the total performance profile.
- The gradual accumulation of additional shares via DRIP amplified the investor’s participation in Principal’s earnings and dividend stream without requiring further capital outlay.
- The five-year holding period allowed near-term macro and market shocks to be absorbed, while the underlying business continued to generate cash flows and return capital to shareholders.
For investors considering how PFG or similar dividend-paying financial stocks might perform over the next five years, the past period underscores the importance of focusing on balance-sheet strength, capital-return policies, and management’s ability to navigate rate cycles and market stress.
However, prospective investors should also weigh potential risks, including regulatory changes, credit losses in an economic downturn, market-driven pressure on fee-based asset management businesses, and the possibility that future interest-rate paths may differ markedly from those observed in the prior five-year span.
Here is one more oft-cited investment reminder before you go:
“The four most dangerous words in investing are: ‘this time it’s different.'” — Sir John Templeton
