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Dividends and the Miscalculation of Total Returns
By InvestingNook  •  November 20, 2015

Most investors love dividends. They are tangible and a relatively secure form of returns by companies to their shareholders. A bird in hand is worth two in the bush right? That being the case, there are some, what I believe to be, misconceptions regarding the understanding of dividends in estimating total returns and the value of dividends under different investment styles.

Price returns versus total returns

A distinction has to be first made between price return and total return. Price return only takes into account the capital appreciation of a stock or a portfolio. Total return, on the other hand, factors in both capital appreciation and dividends received over a period of time.

Naturally, investors know that total return is the more comprehensive measure of rate of return. This is especially pertinent when evaluating stocks with high dividend yields. Take the example of a REIT whose price remains unchanged over ...

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By InvestingNook
As Co-Founder and Fund Manager of Heritage Global Capital Fund, we started InvestingNook as a website dedicated to sharing the knowledge of value investing – allowing our readers achieve an edge over the markets with the knowledge of value investing.
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