Photo credit: commons.wikimedia.org

“When we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”

— Warren Buffett

A long holding period can materially change the economics of an equity investment, particularly when share-price appreciation is paired with regular dividends and disciplined reinvestment. That dynamic is clearly illustrated by Packaging Corp of America (NYSE: PKG), a containerboard and corrugated packaging company whose 20-year total return profile shows how compounding can reshape an initial $10,000 investment.

This review looks at what happened if shares of PKG were purchased in late 2006 and held through late 2026, with dividends reinvested throughout the period. The result was a substantial increase in both share count and ending portfolio value, underscoring the difference between price return alone and total return.

PKG 20-Year Return Details

PKG 20-Year Return Details
Start date:	10/30/2006	$10,000 10/30/2006   $207,221 10/28/2026
End date:	10/28/2026
Start price/share:	$22.64
End price/share:	$248.44
Starting shares:	441.70
Ending shares:	834.05
Dividends reinvested/share:	$53.22
Total return:	1,972.10%
Average annual return:	16.36%
Starting investment:	$10,000.00
Ending investment:	$207,221.50

The numbers are striking. A $10,000 investment in Packaging Corp of America on 10/30/2006 grew to $207,221.50 by 10/28/2026, assuming dividends were reinvested. That equates to a total return of 1,972.10% and an annualized return of 16.36%. [These numbers were computed with the Dividend Channel DRIP Returns Calculator.]

What Drove The Return?

PKG’s result reflects two distinct sources of shareholder return:

• Share-price appreciation: the stock rose from $22.64 to $248.44 over the period.
• Dividend reinvestment: cash dividends were used to buy additional shares, increasing the share count from 441.70 to 834.05.

That second factor is important. Over the period examined, dividends reinvested totaled $53.22 per original share. Reinvestment did not simply add cash income; it increased ownership. Each dividend purchase added incremental shares, and those additional shares then participated in subsequent dividends and price appreciation. Over long periods, that compounding effect can become a major driver of ending wealth.

Why Dividend Reinvestment Matters

For dividend-paying equities, total return is often materially different from price return. A stock can deliver respectable price appreciation, but the full economic result depends on whether distributed cash is spent, held, or reinvested. In this example, reinvestment meaningfully amplified the final outcome.

The mechanics are straightforward:

• Dividends are paid in cash.
• Reinvested dividends buy more shares, typically at the market price on the relevant reinvestment date.
• A larger share count increases future dividend receipts.
• Over time, the compounding effect can become substantial.

That is why long-term return analysis generally focuses on total return rather than price movement alone.

Current Yield And Yield On Cost

Based on the most recent annualized dividend rate of $6.00 per share, PKG currently yields approximately 2.42% using the ending share price of $248.44. That is the current market yield available to a new buyer at that share price.

A separate concept is yield on cost, which measures the current annual dividend against the original purchase price. Using the 2006 starting price of $22.64 per share, PKG’s current annualized dividend of $6.00 translates to a yield on cost of about 26.50%.

Yield on cost is useful for understanding how dividend growth can improve the income productivity of a long-held position. It does not describe the return available to a new investor today, but it does show how a rising dividend stream can alter the economics of an earlier purchase.

A Brief Note On The Business

Packaging Corp of America operates in containerboard and corrugated packaging, with additional exposure to paper products. Demand in these markets is tied to industrial activity, consumer goods shipments, and broader distribution trends. The business is cyclical and can be influenced by input costs, pricing conditions, freight dynamics, and overall economic activity. Even so, durable operating businesses in essential supply-chain categories can create significant long-term shareholder value when cash generation supports both reinvestment and capital returns.

PKG’s 20-year performance highlights the core point: patient ownership of a dividend-paying company, combined with reinvestment, can produce results that look disproportionate to the original capital committed. The final value in this case did not come from a single driver, but from the interaction of capital appreciation, cash distributions, and time.