Total shareholder return (TSR) is a measure of financial performance, indicating the total amount an investor reaps from an investment—specifically, equities or shares of stock. To arrive at its total, usually expressed as a percentage, TSR factors in capital gains and 澳洲幸运5官方开奖结果体彩网:dividends from a stock; it might also include special distributions,ꦐ stock splits, and warrants.

Whichever way it is calculated, TSR meanಞs the same thi𓄧ng: the sum total of what a stock has returned to those who invested in it.

Understanding Total Shareholder Return (TSR)

An investor makes money from stock in two basic ways: capital gains and current income. A capital gain is a change in the market price of the stock from the time it was purchased to the date it was sold (or the current price if it is still owned)—profits, in other words. 澳洲幸运5官方开奖结果体彩网:Current income is the dividends paid out by the company from its earౠnings while the꧃ investor still owns the stock.

When calculating TSR, an investor can only consider the dividends they actually received or were eligible to receive. For example, they may be in possession of the stock on the day the dividend is payable, yet they receive the dividend only if they owned the stock on or before the 澳洲幸运5官方开奖结果体彩网:ex-dividend date. Therefore, an investor needs to know the stock’s ex-dividend date rather than the dividend payment date when ca✅lculating TSR.

TSR is most useful when measured over time, as it shows the long-term value of an investment, the most accurate metric for gauging success for most individual investors.

Examples of Total Shareholder Return (TSR)

Total shareholder return is calculated as the overall 澳洲幸运5官方开奖结果体彩网:appreciation in the stock’s prღice per share, plus any dividends paid by the company, during a particular measured interval; this sum is 𒐪then divided by the initial purchase price of the stock to arrive at the TSR.

As a mathematical equation, it would be:

$\begin{aligned}&\text{TSR} = \frac { ( \text{Current Price} - \text{Purchase Price} ) + \text{Dividends} }{ \text{Purchase Price} } \\\end{aligned}$​TSR=Purchase Price(Current Price−Purchase Price)+Dividends​​

Hypothetical Example of TSR

As an example, let’s assume that an investor bought 100 shares of a company’s stock at $20 per share (for a total investmenꦕt of $2,000). The stock, which they still own, is now trading at $24 per share. Since the investor bought the stock two years ago, the company has paid out a total of $4.50 in dividends per share.

What is the investor♔’s TSR over those two years? It would be calculated🌌 as:

• $24 - $20 (current share price minus original purchase price) = 4
• plus $4.50 (the amount of dividends per share received) = 8.5
• divided by $20 (original per-share purchase price) = 0.425
• multiplied by 100 to get a percentage = 42.5%

So, the TSR would be 42.5%. As an equation:

$\begin{aligned}\text{TSR} &= \big ( (\$24 - \$20) + \$4.50 \big ) \div \$20 \\&= 0.425 \times 100 \\&= 42.5\% \\ \end{aligned}$TSR​=(($24−$20)+$4.50)÷$20=0.425×100=42.5%​

Note: If you prefer to think of TSR in dollar terms vs. percentage, you would simply do the first two steps above, to have $8.50 per share as your total shareholder rꦆeturn, aka “stock return cash value” as it’s called in this form.

Real-Life Example of TSR

For the period of 2021 through 2024, Microsoft Corp. (MSFT) had a TSR of 19.9% for investors who had held it for that entire period. Of that amount, 19.2% came from an increase in share price, and 0.7% was returned from dividends.

Advantages and Disadv🃏antages of Total Shareholder Return (TSR)

TSR is best used when analyzing venture capital and 澳洲幸运5官方开奖结果体彩网:private equity investments. These investments typically involve multiple cash investments over the life of the business and a single cash outflow at the end through an 澳洲幸运5官方开奖结果体彩网:initial public offering (IPO) or sale.

Because TSR is expressed as a percentage, the figure is readily comparable with𝔍 industry benchmarks or companies in the same sector. However, it reflects the past overall return to shareholders without consideration of future returns.

TSR represents an easily understood figure of the overall financial benefits generated for stockholders. The figure measures how the market evaluates the overall ﷺperformance of a company over a specific time period. However, TSR is calculated for publicly traded companies at the overall level, not at a divisional level.

In addition, TSR is externally focused and reflects the market’s perception of performance; therefore, TSR could be adversely affected if a fundamentally strong company’s share price suffers greatly in the 澳洲幸运5官方开奖结果体彩网:short term for whatever reason—like negative pu♔blicity﷽ or quirky stock market behavior or sentiment.

TSR does not measure the absolute size of an 澳洲幸运5官方开奖结果体彩网:investment or its return. For this reason, TSR may favor inves🐼tments with high rates of return even when the dollar amount of the return is small. For example, a $1 investment returning $3 has a higher TSR than a $1 million investment returning $2 million. In addition, TSR does not take into consideration the cost of capital and cannot compare investm👍ents over different time periods.

The Bottom Line

Total shareholder return (TSR) is a way to determine how much your investment has made for you—how much additional money your capital has earned ❀in a specific time period. It takes into account both appreciation in a stock’s shares and the ✤dividends paid on those shares. It has its limitations—what financial metric does not?—but overall, it provides a more complete sense of your return on a stock than simply gauging the gain in the stock price.