Investors have been rewarded over the years by taking a chance on Sirius XM Holdings (SIRI -3.89%). The satellite radio provider's stock is closing in on what should be its 10th consecutive year of positive annual returns. Will the next five years live up to the winning streak?

A lot can and will happen to Sirius XM in the coming years. The connected car will be a challenge and an opportunity. What Sirius does with its gargantuan free cash flow -- returning it to shareholders through more buybacks and dividends or going on another shopping spree -- will also help color in the next few years of stock moves. Let's hop into a time machine and check out how Sirius XM should be holding up come 2023. 

Katy Perry at a Sirius XM radio interview.

Katy Perry at a Sirius XM radio interview. Image source: Sirius XM Holdings.

Turning the dial

Sirius XM Holdings will be materially different in a few months. It will close on its all-stock deal for Pandora (P) in early 2019. The transaction itself may not seem like much. The deal that originally valued all of Pandora at $3.5 billion -- and now closer to $3.1 billion -- is weighing in at less than 10% of Sirius XM's $34 billion in enterprise value. 

Pandora is generating less than a third of Sirius XM's $5 billion in trailing revenue, and its lack of profitability may initially eat marginally into the satellite radio giant's steady, bountiful, and growing earnings. However, there's a lot of unappreciated synergy in the pairing. The combined company will reach a huge audience. Sirius XM's 33.1 million satellite radio subscribers and Pandora's 68.8 million active listeners -- including 6.8 million premium accounts -- will make it a juggernaut in and out of the car. Sorry, Howard Stern. Sirius XM will be the true king of all media at that point. 

We know what analysts think about 2023. Wall Street pros see a much more profitable company than the two are on their own, closing in on $10 billion in revenue. Reality will be a far different beast. Sirius XM's war chest will continue to grow, and the $1.5 billion that it's generating in free cash flow will open the door for more complementary acquisitions. If there's nothing worth buying, then it's a fair bet that money will be returned to shareholders in the form of more stock buybacks and dividend hikes. 

Sirius XM should continue to dominate the automotive dashboard. We've seen sequential upticks in subscribers over the years, even as more cars have seamless access to Bluetooth-propelled streaming audio apps. There's little reason to expect that dominance to waver, even as options will open up as more self-driving vehicles hit the road. 

Sirius XM is in a position of strength, and it will be even stronger in five years. Terrestrial radio will continue to fade, pushing more premium audio content creators to Sirius XM's negotiating table. Tech giants with streaming services may take some key talent, but Sirius XM will still score the largest haul. 

The growth catalysts in the next year or two are clear. Closing the Pandora acquisition early next year will allow Sirius XM to make its satellite radio service stickier by bundling it with Pandora digital offerings that, quite frankly, are superior to what Sirius XM has served up in recent years. Pandora's making major strides in milking more revenue out of advertisers, something that will only grow given the larger combined audience. The opportunities will grow over time. Sirius XM stock is unlikely to move higher in each of the next five years as it has over the past 10, but it should continue to beat the market over that time.