“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
A five-year holding period can be a useful test of how a dividend-paying utility stock performs through changing market conditions. For Public Service Enterprise Group Inc (NYSE: PEG), the period beginning in June 2021 shows how price appreciation and reinvested dividends combined to shape total return.
Using a dividend reinvestment framework, a hypothetical $10,000 investment in PEG on 06/03/2021 would have grown to $14,988.12 by 06/02/2026. That equates to a 49.88% total return, or an average annual return of 8.43%. For a regulated utility, that result highlights the importance of evaluating total return rather than focusing only on the change in share price.
PEG 5-Year Return Details
| Start date: | 06/03/2021 |
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| End date: | 06/02/2026 | ||||
| Start price/share: | $61.71 | ||||
| End price/share: | $78.32 | ||||
| Starting shares: | 162.05 | ||||
| Ending shares: | 191.37 | ||||
| Dividends reinvested/share: | $11.56 | ||||
| Total return: | 49.88% | ||||
| Average annual return: | 8.43% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $14,988.12 | ||||
The result was driven by two sources of return. First, the stock price rose from $61.71 to $78.32 per share. Second, dividends added meaningfully to performance when reinvested. Over the holding period, total dividends reinvested amounted to $11.56 per share, increasing the share count from 162.05 to 191.37.
What Drove the Total Return?
For utility stocks such as PEG, income is often a substantial part of long-term shareholder return. That is particularly true in periods when valuation multiples fluctuate or when interest-rate changes influence the sector’s relative appeal. In this case, dividends were not a minor supplement; they were a significant contributor to the ending value of the investment.
That distinction matters. Looking only at share price appreciation would understate the investment outcome. A total return approach captures the full economic result by incorporating both capital gains and the compounding effect of reinvested cash distributions.
Key Takeaways From PEG’s 5-Year Performance
- A $10,000 investment grew to $14,988.12 over five years.
- Total return was 49.88% with dividends reinvested.
- The annualized return was 8.43%.
- Reinvested dividends increased the share count from 162.05 to 191.37.
- Total dividends received and reinvested equaled $11.56 per share over the period.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Dividend Yield and Yield on Cost
Based on the most recent annualized dividend rate of $2.68 per share, PEG has a current yield of approximately 3.42%. Another useful measure is yield on cost, which compares the current annualized dividend to the original purchase price rather than the current market price.
Using the 06/03/2021 purchase price of $61.71, the current annualized dividend implies a yield on cost of 5.54%. That figure does not change the stock’s market yield, but it illustrates how dividend growth can improve the income generation of a long-held position.
Why PEG Fits a Long-Term Return Analysis
Public Service Enterprise Group operates in a segment of the market where regulated earnings, capital investment, and dividend policy are central to the investment case. That tends to make long-horizon analysis more informative than short-term price watching. For companies in the utility sector, the combination of steady cash generation and recurring dividends can produce a return profile that is more balanced than a simple look at price charts would suggest.
The broader lesson from PEG’s 2021-to-2026 performance is straightforward: for dividend-paying stocks, compounding often works through both rising distributions and reinvestment. Over a full five-year period, that can materially change the final investment outcome.
More investment wisdom to ponder:
“An investment in knowledge pays the best interest.” — Benjamin Franklin
