How to Calculate Total Stock Returns Many investors focus their attention on how a stock's price changes over time. However, when you're talking about dividend-paying stocks, that doesn't even begin to tell the entire story. For example, if I tell you that Verizon was trading for roughly $54 per share three years ago, and today it's trading around $61 per share, it may sound like investors who bought the stock made $7 per share over those three years. However, if I then tell you that over the past three years, Verizon also paid its shareholders a total of $7 per share in dividends, that changes the story a little. Instead of the $7 capital gain per share, which translates to about 13%, investors made twice that much when taking dividends paid into account. Total return takes both capital gains and dividends into account, in order to provide a complete picture of how a stock performed over a specified time period. This can be extremely useful for evaluating returns among dividend-paying stocks, and for comparing the performance of dividend-paying stocks to those without any dividends. It can also help compare investment results when stocks were held for different lengths of time. Read the full story to understand the different types of return calculations, and we'll walk you through the math, too. |
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