“I buy on the assumption that they could close the market the next day and not reopen it for five years.”
— Warren Buffett
The Warren Buffett quote above highlights the importance of time horizon when committing capital. In the short run, price action is inherently uncertain: a week or two after buying any given stock, the broader equity market could sell off sharply. The key question for long-term investors is how they would respond in that environment, and whether the underlying business can compound value over a multi-year period.
For investors who frame decisions over years rather than weeks, the focus naturally shifts from short-term volatility to long-term total return — combining both price appreciation and dividends. In this article, we review the experience of investors from early 2021 who allocated to shares of Packaging Corp of America (NYSE: PKG) with a five-year “buy and hold” mindset.
Packaging Corp of America is one of the largest producers of containerboard and corrugated packaging in North America, supplying packaging solutions to end-markets including e-commerce, food and beverage, industrial products, and consumer goods. As such, PKG is often viewed as a cyclical, economically sensitive business, but one that has historically generated strong cash flows and returned significant capital to shareholders through dividends and share repurchases.
| Start date: | 04/07/2021 |
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| End date: | 04/06/2026 | ||||
| Start price/share: | $138.05 | ||||
| End price/share: | $205.40 | ||||
| Starting shares: | 72.44 | ||||
| Ending shares: | 83.97 | ||||
| Dividends reinvested/share: | $24.00 | ||||
| Total return: | 72.47% | ||||
| Average annual return: | 11.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $17,249.00 | ||||
The above analysis shows that over the five-year holding period from 04/07/2021 through 04/06/2026, PKG delivered an annualized rate of return of 11.52%. A hypothetical $10,000 investment made five years ago would have grown into $17,249.00 as of 04/06/2026, assuming dividends were fully reinvested. On a total return basis, that represents a gain of 72.47%. These figures are net of the volatility and macro uncertainty investors experienced over the period — including elevated inflation, a rapid rise in interest rates, and concerns about a potential recession — and underscore the power of staying invested through a full cycle.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
Beyond share price appreciation, a meaningful component of PKG’s total return over the past five years has been its dividend. Packaging Corp of America paid a cumulative $24.00 per share in dividends to shareholders over the period in question. For investors who elected automatic reinvestment, those cash distributions were used to purchase additional shares, increasing their ownership stake from 72.44 shares to 83.97 shares in this example. Reinvested dividends can be a powerful engine of compounding: each new share acquired entitles the investor to a proportionally larger stream of future dividends.
For the above calculations, the closing price on each ex-dividend date is used to determine the reinvestment price, a common simplifying assumption in DRIP analyses. In practice, execution prices achieved through a broker-administered dividend reinvestment plan may differ modestly from those assumptions, but the overall compounding effect over a multi-year period is typically directionally similar.
Based upon the most recent annualized dividend rate of 5/share, we calculate that PKG has a current yield of approximately 2.43%. While this headline yield is moderate relative to high-yield equities, the company has historically pursued a policy of growing its dividend over time when supported by free cash flow, which can enhance the income profile for long-term holders. Another useful datapoint is “yield on cost” — that is, the current annualized dividend of 5 expressed as a percentage of the original $138.05 per share purchase price. This equates to a yield on cost of 1.76% in our example. If PKG were to continue raising its dividend over time, the yield on cost for 2021-era buyers could increase substantially in future years.
From a portfolio construction standpoint, PKG illustrates several characteristics investors often seek in long-term holdings:
- Exposure to a real-economy, cash-generative business benefitting from structural packaging demand, including e-commerce and consumer staples.
- A disciplined capital allocation framework, balancing reinvestment in the business with steady dividends and opportunistic buybacks.
- A track record of navigating cyclical downturns in containerboard demand while maintaining balance sheet flexibility.
It is important to recognize, however, that future returns will depend on a range of variables, including global economic growth, packaging volumes, pricing discipline in the containerboard industry, input cost trends (notably fiber and energy), and management’s ongoing capital allocation decisions. The strong 2021‑2026 outcome does not guarantee similar performance over the next five years, but it does offer a concrete case study in how a patient, dividend-focused approach can play out when applied to a high-quality, cash-flow-generative industrial company.
Investors evaluating PKG today may wish to consider not only the current dividend yield and valuation metrics, but also the company’s long-term competitive position in North American containerboard, its exposure to secular demand tailwinds (such as sustainability-focused packaging solutions), and the potential impact of interest rate and inflation dynamics on both earnings and equity risk premia.
One more piece of investment wisdom to leave you with:
“Cash is a fact, profit is an opinion.” — Alfred Rappaport
