“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 is a practical way to evaluate how a large-cap dividend stock performs through varying market conditions. For PepsiCo Inc (NASD: PEP), the 2021-to-2026 investment outcome shows a familiar pattern for mature consumer staples companies: limited share-price appreciation, but a meaningful contribution from dividends and reinvestment.
Using the period from 06/10/2021 through 06/09/2026, a $10,000 investment in PepsiCo would have grown to $11,325.12 with dividends reinvested. That equates to a total return of 13.27% and an average annual return of 2.52%.
PEP 5-Year Return Details
| Start date: | 06/10/2021 |
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| End date: | 06/09/2026 | ||||
| Start price/share: | $147.60 | ||||
| End price/share: | $142.78 | ||||
| Starting shares: | 67.75 | ||||
| Ending shares: | 79.33 | ||||
| Dividends reinvested/share: | $25.48 | ||||
| Total return: | 13.27% | ||||
| Average annual return: | 2.52% | ||||
| Starting investment: | $10,000.00 | ||||
| Ending investment: | $11,325.12 | ||||
In practical terms, PepsiCo produced a positive five-year total return, but most of that outcome came from cash distributions rather than stock-price gains. The share price declined modestly from $147.60 to $142.78 over the period, while reinvested dividends increased the share count from 67.75 to 79.33. That distinction matters: for lower-volatility dividend stocks, total return often depends more on income compounding than on multiple expansion.
What Drove PepsiCo’s 5-Year Return?
The return profile here can be summarized in three points:
- Price return was weak. PepsiCo shares ended the period below the initial purchase price.
- Dividends provided the bulk of the result. Over the five years examined, the stock paid $25.48 per share in dividends.
- Reinvestment supported compounding. Reinvested payouts increased the investor’s share count, helping offset the softer share-price performance.
This is a useful reminder that headline price movement can understate the economic return of a dividend-paying stock. For companies with established brands, steady cash generation, and a long record of shareholder distributions, the dividend can be a significant part of the investment case, particularly across multi-year holding periods.
[These numbers were computed with the Dividend Channel DRIP Returns Calculator.]
How Dividend Reinvestment Changed the Outcome
Dividend reinvestment is central to this result. Rather than taking cash payments out of the position, the calculation assumes each dividend was used to purchase additional PepsiCo shares at the closing price on the ex-dividend date. Over time, that lifted the holding from 67.75 shares to 79.33 shares.
That mechanism helps explain why the investment still generated a positive total return even though the ending share price was lower than the starting price. In effect, the investor accumulated more shares while collecting income, allowing the position value to compound despite muted capital appreciation.
Current Yield and Yield on Cost
Based on the most recent annualized dividend rate of $5.92 per share, PEP has a current yield of approximately 4.15% using the ending share price of $142.78.
Another useful measure is yield on cost, which compares the current annualized dividend with the original purchase price. Using the 06/10/2021 entry price of $147.60, PepsiCo’s current annualized dividend translates to a yield on cost of about 4.01%.
Yield and yield on cost serve different purposes:
- Current yield shows the income rate available at today’s share price.
- Yield on cost shows how the income stream has grown relative to the original entry price.
What the PepsiCo Example Suggests
This five-year PepsiCo investment outcome illustrates the trade-off often found in defensive dividend stocks. Investors may get resilience, recurring cash distributions, and lower dependence on a single growth narrative, but total return can still be modest if valuation compresses or earnings growth does not translate into sustained price appreciation.
For PepsiCo specifically, the case over this period was not one of dramatic upside. It was instead an example of how a steady dividend payer can still deliver a positive return through reinvested income, even when the stock itself finishes slightly below the original purchase price.
“Successful investing is anticipating the anticipations of others.” — John Maynard Keynes
