Total return
InvestingDefinition
The complete return from an investment, counting BOTH the change in price AND every dividend or interest payment, with those payments assumed reinvested. Total return is the only honest way to compare two investments because price alone is misleading.
A stock that paid 3% in dividends and went up 7% delivered a 10% total return, not 7%. Quoting historical S&P 500 returns without dividends dramatically understates the real result.
A stock that paid 3% in dividends and went up 7% delivered a 10% total return, not 7%. Quoting historical S&P 500 returns without dividends dramatically understates the real result.
Formula
Total return = (Ending value + distributions reinvested) divided by Beginning value, minus 1
Example
From 1990 to 2020 the S&P 500 price went up about 750%. But the total return, with dividends reinvested, was about 1,800%. The extra 1,050 percentage points came entirely from reinvested dividends compounding over three decades.