“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
One of the most important things investors can learn from Warren Buffett, is about how they approach their time horizon for an investment into a stock under consideration. Because immediately after buying shares of a given stock, investors will then be able to check on the day-to-day (and even minute-by-minute) market value. Some days the stock market will be up, other days down. These daily fluctuations can often distract from the long-term view. Today, we look at the result of a five year holding period for an investor who was considering Principal Financial Group Inc (NASD: PFG) back in 2020, bought the stock, ignored the market’s ups and downs, and simply held through to today.
| Start date: | 08/21/2020 |
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| End date: | 08/20/2025 | ||||
| Start price/share: | $42.61 | ||||
| End price/share: | $78.72 | ||||
| Starting shares: | 234.69 | ||||
| Ending shares: | 282.67 | ||||
| Dividends reinvested/share: | $13.08 | ||||
| Total return: | 122.52% | ||||
| Average annual return: | 17.35% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $22,254.38 | ||||
As we can see, the five year investment result worked out exceptionally well, with an annualized rate of return of 17.35%. This would have turned a $10K investment made 5 years ago into $22,254.38 today (as of 08/20/2025). On a total return basis, that’s a result of 122.52% (something to think about: how might PFG shares perform over the next 5 years?). [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Notice that Principal Financial Group Inc paid investors a total of $13.08/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 3.12/share, we calculate that PFG has a current yield of approximately 3.96%. Another interesting datapoint we can examine is ‘yield on cost’ — in other words, we can express the current annualized dividend of 3.12 against the original $42.61/share purchase price. This works out to a yield on cost of 9.29%.
Another great investment quote to think about:
“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.” — Peter Lynch
