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How to Calculate the Performance of a Stock That Has Dividends

Original post by Mark Kennan of Demand Media

Dividends play a key role in many stock portfolios.

If your stock's price per share does not increase, or even decreases, you may still make a profit if the stock pays dividends. When measuring the performance of a stock that pays dividends, if you do not account for the dividends, you do not get a true picture of the return. When measuring the return of a stock that pays dividends, you can measure return as a dollar figure or a percentage of the purchase price.

Contents

Step 1

Subtract the initial price of the stock from the ending price. If your answer is negative, your stock decreased in value. For example, if you bought a stock for $35 and sold it for $32, you lost $3.

Step 2

Add any dividends paid by the stock while you owned it. In this example, if the stock paid $1.20 in dividends, add $1.20 to $-3 to get $-1.80.

Step 3

Divide the gain or loss after accounting for dividends by the purchase price to find the rate of return. In this example, divide $-1.80 by $35 to get -0.0514, or a loss of 5.14 percent.


                   

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About the Author

Mark Kennan is a freelance writer specializing in finance-related articles. He has worked as a sports editor for "Ring-Tum Phi" and published articles on a number of online outlets. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.

Photo Credits

  • Jupiterimages/Goodshoot/Getty Images


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