“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
A long-term investment in Principal Financial Group Inc (NASD: PFG) illustrates how total return is built through both share-price appreciation and reinvested dividends. Using a 20-year holding period beginning in August 2006, a hypothetical $10,000 investment in PFG would have grown to $39,235.68 by 08/24/2026, assuming dividends were reinvested throughout the period.
That outcome matters because Principal Financial Group operates in businesses where dividend income, capital allocation, and compounding can materially shape long-run shareholder returns. For investors evaluating financial stocks, insurers, and asset managers, the PFG example shows why a simple price chart often understates the full economics of ownership.
PFG 20-Year Return Details
| Start date: | 08/25/2006 |
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| End date: | 08/24/2026 | ||||
| Start price/share: | $52.92 | ||||
| End price/share: | $111.89 | ||||
| Starting shares: | 188.96 | ||||
| Ending shares: | 350.71 | ||||
| Dividends reinvested/share: | $33.59 | ||||
| Total return: | 292.41% | ||||
| Average annual return: | 7.07% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $39,235.68 | ||||
The calculation above implies that an initial $10,000 stake in Principal Financial Group stock nearly quadrupled over the period, producing a cumulative return of 292.41% and an annualized return of 7.07%. In dollar terms, the investment added $29,235.68 of value over 20 years. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
What Drove the Return
The result was not driven by price appreciation alone. PFG’s share price rose from $52.92 to $111.89 over the period, but the total return was enhanced by dividends that were assumed to be reinvested. That matters because reinvestment increases share count over time, which in turn raises the amount of future dividend income received.
In this case, the original 188.96 shares grew to 350.71 shares by the end of the period. That increase in share count is a visible measure of compounding at work. Over long holding periods, dividend reinvestment can account for a meaningful portion of total shareholder return, especially in mature financial companies with established payout policies.
Why Dividend Reinvestment Matters
Principal Financial Group paid a cumulative $33.59 per share in dividends over the 20-year period. Reinvesting those distributions means each dividend purchase generated additional shares, and those additional shares were then eligible to receive subsequent dividends.
This process can be summarized simply:
- Cash dividends provide a direct income stream.
- Reinvestment converts that income into additional shares.
- A larger share base can accelerate future dividend accumulation.
- Over time, compounding can materially widen the gap between price return and total return.
That distinction is particularly important when evaluating long-term returns in dividend-paying stocks. A stock may appear to have delivered only moderate gains on a price-only basis, while its total return profile is substantially stronger once reinvested distributions are included.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $3.36 per share, PFG has a current yield of approximately 3.00% using the ending share price of $111.89. Another useful measure is yield on cost, which compares the current annual dividend to the original purchase price.
Using the 2006 entry price of $52.92 per share, the current annualized dividend of $3.36 translates to a yield on cost of 5.67%. For long-term holders, yield on cost can help illustrate how dividend growth changes the income profile of an investment over time, even if the current market yield appears more modest to a new buyer.
Key Takeaways From the PFG Example
- A $10,000 investment in Principal Financial Group in August 2006 grew to $39,235.68 by August 2026.
- The total return was 292.41%, or 7.07% annualized, assuming dividend reinvestment.
- Share count increased from 188.96 to 350.71 through reinvested dividends.
- The current annualized dividend of $3.36 implies a current yield near 3.00% and a yield on cost of 5.67% based on the original entry price.
For long-horizon investors, the PFG case is a reminder that holding period, dividend policy, and reinvestment assumptions can be just as important as the starting valuation. In dividend-paying financial stocks, compounding often happens gradually and quietly, but over two decades its impact can be substantial.
“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” — Warren Buffett
