“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 reveal far more about an investment than short-term price moves. For Principal Financial Group Inc (NASD: PFG), a $10,000 investment made in August 2021 and held through August 2026 produced a strong total return, driven by both share price appreciation and reinvested dividends. The result offers a clear case study in how long-term compounding works in a dividend-paying financial stock.
Using a dividend reinvestment framework, the investment grew from $10,000 to $20,627.39 over the five-year period, equivalent to a total return of 106.26% and an average annual return of 15.60%.
PFG 5-Year Return Details
| Start date: | 08/10/2021 |
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| End date: | 08/07/2026 | ||||
| Start price/share: | $65.70 | ||||
| End price/share: | $113.40 | ||||
| Starting shares: | 152.21 | ||||
| Ending shares: | 181.89 | ||||
| Dividends reinvested/share: | $13.98 | ||||
| Total return: | 106.26% | ||||
| Average annual return: | 15.60% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $20,627.39 | ||||
The headline figure is straightforward: Principal Financial Group more than doubled the value of the original investment over the period measured. That performance reflects not only a higher share price, but also the contribution of dividends reinvested into additional shares along the way. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
How the Return Was Generated
There were two sources of return:
- Capital appreciation: the share price rose from $65.70 to $113.40.
- Dividend reinvestment: dividends totaling $13.98 per share over the holding period were assumed to be reinvested, increasing the share count from 152.21 to 181.89.
That distinction matters. A price-only view would understate the investment outcome, while a total-return view captures the full economic benefit to a shareholder who stayed invested and reinvested distributions.
Why Dividend Reinvestment Matters
Dividend reinvestment strengthened the end result by converting cash distributions into incremental ownership. Over multi-year holding periods, that process can become a meaningful part of compounding, particularly for insurers and asset managers that regularly return capital through dividends.
In this case, reinvestment added nearly 30 shares over five years. Those additional shares then participated in subsequent dividends and in the stock’s price appreciation, reinforcing the compounding effect.
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 2.96% using the ending share price of $113.40.
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 original entry price of $65.70, the current dividend rate implies a yield on cost of 4.51%.
In concise terms:
- Current yield: annual dividend divided by the current share price.
- Yield on cost: annual dividend divided by the original purchase price.
Yield on cost does not describe what a new investor would earn today, but it does help illustrate how dividend growth can improve the income profile of a successful long-term holding.
What This Says About Long-Term Ownership
Principal Financial Group operates in businesses where earnings power is influenced by market levels, assets under management, spreads, underwriting discipline, and capital returns. For stocks in this part of the financial sector, five-year outcomes are often shaped by a combination of valuation changes, operating performance, and sustained dividend policy. The PFG result over this period shows how a disciplined holding period can allow those drivers to accumulate into a materially different outcome than a short-term trade might capture.
It also underscores a broader point: total return is the more complete lens for evaluating dividend-paying stocks. A rising share price attracts attention, but reinvested dividends can account for a meaningful share of long-term performance.
“Investors should always keep in mind that the most important metric is not the returns achieved but the returns weighed against the risks incurred. Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.” — Seth Klarman
