Total Shareholder Return (TSR)
Annualized total return to shareholders including capital appreciation and dividends received. Computed as the geometric average return over the holding period, treating dividends as an additional terminal cash flow.
When to use: Use to measure realized return on a stock holding over any period. TSR is the standard equity-return metric reported by management teams in proxy filings and used in performance-based compensation.
Formula
Variables
| Symbol | Name | Description | Unit |
|---|---|---|---|
| TSR | Total Shareholder Return | Total annualized return including price change and dividends, as a decimal | % |
| P0 | Maximum Stock Price | Most you should pay per share today | $ |
| Dividends | Dividends Received | Total dividends received over the holding period | $ |
| n | Holding Period | Years held before exit | years |
Real-Life Examples
Example 1: 5-Year Hold
Bought at $50, sold 5 years later at $80, received $10 of total dividends along the way.
Given
Step-by-Step
12.5% annualized total return. About 9.9% from price appreciation (50→80 over 5 years) and ~2.5% from dividends. Compare against the S&P 500 over the same period to gauge alpha.
Frequently Asked Questions
No — the simple form treats dividends as a terminal cash flow alongside the sale price. To assume full reinvestment at market prices, compute a dividend-reinvested total return index, which is slightly higher because intermediate dividends compound.
TSR uses simple geometric return on (price + dividends), assuming dividends are received at the end. The P/E-framework return decomposes the same outcome into earnings growth × multiple change × dividend yield — useful for attributing performance, while TSR is the more common reporting convention.
TSR is gross — pre-tax, pre-fee. After-tax TSR depends on holding period (long-term capital gains rate vs. ordinary income), dividend qualification, and account type (taxable vs. tax-deferred). Adjust as needed for your situation.