“Someone’s sitting in the shade today because someone planted a tree a long time ago.”
— Warren Buffett
The Warren Buffett investment philosophy calls for a long-term investment horizon: an investment period measured in decades rather than quarters. A two-decade holding period fits squarely within that framework and offers a meaningful test of the power of staying invested through multiple market and economic cycles.
How would such a strategy have worked out for an investment in Principal Financial Group Inc (NASD: PFG), a diversified financial services provider focused on retirement, asset management, and insurance solutions? Below, we examine the outcome of a hypothetical buy-and-hold investment in the stock beginning in 2006, with all dividends reinvested.
| Start date: | 03/27/2006 |
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| End date: | 03/26/2026 | ||||
| Start price/share: | $49.46 | ||||
| End price/share: | $88.94 | ||||
| Starting shares: | 202.18 | ||||
| Ending shares: | 372.28 | ||||
| Dividends reinvested/share: | $32.77 | ||||
| Total return: | 231.11% | ||||
| Average annual return: | 6.17% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $33,132.18 | ||||
The above analysis shows that the two-decade investment result worked out solidly for long-term shareholders, with an annualized rate of return of 6.17% when dividends are fully reinvested. That performance would have turned a $10,000 investment made 20 years ago into $33,132.18 as of 03/26/2026.
On a total return basis, that is a gain of 231.11% over the period. Notably, this return was earned across a challenging sequence of market environments, including the 2007‑2009 global financial crisis, the 2011 U.S. debt ceiling episode, the 2020 COVID‑19 market shock, and subsequent monetary tightening. The result underscores the importance of remaining invested through volatility rather than attempting to time entries and exits. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
For context, over long periods U.S. large-cap equities historically have delivered average nominal total returns in the mid-to-high single digits. A 6.17% annualized return therefore represents a competitive outcome for a single, dividend-paying financial stock held across multiple cycles, particularly when achieved via a disciplined buy-and-hold approach.
The Role of Dividends and Reinvestment
Always an important consideration with a dividend-paying company is whether to reinvest dividends or take them in cash. Over the past 20 years, Principal Financial Group Inc has paid $32.77 per share in dividends on a cumulative basis. For the above analysis, we assume that the investor reinvests all dividends into new shares of stock via a dividend reinvestment plan (DRIP). For the calculations shown, reinvestment is performed using the closing price on the ex-dividend date for each dividend payment.
This reinvestment meaningfully increased the investor’s share count, from an initial 202.18 shares to 372.28 shares by the end of the period. The additional 170.10 shares accumulated purely from reinvested dividends represent a material component of the total return profile. In general, for dividend payers with sustainable distributions, compounding through reinvestment tends to be a key driver of long-run wealth creation.
Based upon the most recent annualized dividend rate of 3.2 per share, we calculate that PFG has a current yield of approximately 3.60%. Another useful datapoint is “yield on cost” — the current annualized dividend of 3.2 expressed relative to the original $49.46 per share purchase price. On that basis, the investor enjoys a yield on cost of 7.28%.
In other words, each year the shareholder now receives, in dividends alone, the equivalent of more than 7% of the original capital deployed, before accounting for any further price appreciation or dividend growth. For income-focused investors with long horizons, this dynamic is central to the appeal of dividend reinvestment strategies.
Long-Term Perspective and Risk Considerations
Principal Financial Group operates in interest-rate- and market-sensitive businesses, including retirement services, asset management, and insurance. Over the 20-year window analyzed, shareholders were exposed to cyclical earnings swings, credit market stress, and regulatory change — typical risk factors for financial institutions.
The 6.17% annualized outcome therefore reflects not a smooth journey, but a willingness to hold through drawdowns. During the 2008‑2009 crisis, for example, many financials experienced deep price declines and, in some cases, dividend cuts. Investors who sold amid stress would have realized sharply different results than those captured in this stay-the-course scenario. The figures here assume no additional contributions, no withdrawals, and the absence of trading costs or taxes.
Past performance, of course, does not guarantee future results. Future total returns for PFG will depend on a range of factors, including the company’s capital allocation decisions, underwriting discipline, fee and spread income, competitive dynamics in retirement and asset management markets, and the prevailing interest rate and credit environment. Nonetheless, the 2006‑2026 experience provides a concrete illustration of how a long-term, dividend-aware strategy can play out when consistently applied.
Another great investment quote to consider in this context:
“Games are won by players who focus on the playing field, not by those whose eyes are glued to the scoreboard.” — Warren Buffett
For investors assessing PFG or similar dividend-oriented financial stocks today, the key questions typically include:
- Is the dividend well covered by earnings and cash flow across a full cycle?
- Does management have a track record of disciplined capital deployment and balance sheet stewardship?
- How sensitive are earnings to equity market levels, credit conditions, and interest rates?
- What role could the stock reasonably play within a diversified income or total-return portfolio?
As the 20-year case study demonstrates, answering those questions with a long-term lens can matter more than reacting to short-term price moves. For patient investors, combining quality, income, and reinvestment can be a powerful, if often underappreciated, strategy.
