Alternatively, knowing your total return on an annualized basis could help compare the results of that investment with others you own, or with the stock market as a whole. If you held a stock for several years, it might be useful to know its overall total return during your holding period. Total return can also be expressed on an overall basis, or over specified time intervals. It can also help compare investment results when stocks were held for different lengths of time. This can be extremely useful for evaluating investment returns among dividend-paying stocks, and for comparing the performance of dividend-paying stocks to those without any dividends or other distributions. 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. Instead of the $7 capital gain per share, which translates to about 13%, investors actually made twice that much when taking dividends paid into account.
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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. 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 the three-year period. However, when you're talking about dividend-paying stocks, that doesn't even begin to tell the entire story.
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Follow him on Twitter to keep up with his latest work!įollow investors focus their attention on how a stock's price changes over time. Matt specializes in writing about bank stocks, REITs, and personal finance, but he loves any investment at the right price. Matt is a Certified Financial Planner based in South Carolina who has been writing for The Motley Fool since 2012.