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ABC plc has just paid a dividend of 30c per share.
It’s share price is $4.20 – one year ago it’s share price was $3.50.What is the total shareholder return over the year?
What is the formula to calculate this?
There is no formula – it is just logical (and is explained on page 18 of our free lecture notes).
The share price increased from 3.50 to 4.20, i.e. 0.70
The dividend received is 0.30.So a total return is 0.70 + 0.30 = 1.00, on a share price of 3.50. So 1/3.5 = 28.57%
i don’t quite understand about this. So it assumes that if the share price go up by 0.7, then the shareholders are entitled to receive this incremental too?
They do not receive it, but if the share price is higher on the stock exchange then the shareholder is worth more (if they wanted to they could sell the share for 0.70 more than they could have sold it for at the start of the year).
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