microsoft stock profit calculator dividend

In order to calculate your total return over any given period of time, simply take your total investment gains (in our example, £155), divide it by the original value of the investment (£1,000), and multiply by 100 to convert it to a percentage. That percentage represents your total return. However, you now own 105 shares, meaning your investment is valued at £1,155 or 15.5% more than you paid for it. 12 months later, the share price rises from £10 to £11.īased solely on the share price, your return is 10%. If the company pays a 5% dividend, you'll receive £50, enabling you to acquire five additional shares. You buy 100 shares at £10 per share the initial value of your investment is therefore £1,000. Again, a simple example may prove helpful. Total return is a straightforward measure of the overall return from an investment – for shares, it comprises the combination of capital gains through increases in the share price with income gains through dividend payouts, and assumes that those dividends are reinvested. Dividend payouts are therefore a way of rewarding those long-term shareholders for the risk premium of holding a company’s equity. Shareholders clearly don’t invest in companies to be a deposit account over the long run, and will subject them to a return expectation somewhat higher than the prevailing savings rate. They could, of course, simply leave surplus cash on the balance sheet, but a business seeking only to compound its cash is likely to see its longer-term growth prospects severely compromised. When deploying capital in order to optimise the utilisation of cashflow, a business proprietor will typically have five options:

A monetary amount per share, it is referred to as a dividend 'yield' when expressed as a percentage of the company’s share price – for example, a business with shares priced at £100 making a dividend payment of £5 is said to have a yield of 5%. Clearly, it's dividends that have come to the rescue.ĭividend yields and total returns – what are they and how do you calculate them?Ī dividend is the distribution of a portion of a company’s earnings to its shareholders. Over 20 years, that equates to an average annual return of 3% – not overly impressive, but, unlike deposit investments, you would still have beaten inflation … and it's certainly rather more comforting than a circa 20% loss. On 9 th March 2020, even after a 7.7% one-day fall, one of the largest ever, it stood at 22,144 – a 78% rise. On 31 st December 1999, the FTSE 100 Total Return Index stood at 12,447. Unsurprisingly, on reviewing the performance of the FTSE 100 on a total return basis over the last 20 years, the picture looks markedly different. Total return indices do exist but oddly, despite the fact that they deliver a much more reliable measure of overall investment returns, are not widely publicised. A purely one-dimensional analysis of this kind is fatally flawed for the simple reason that the index doesn’t deliver long-term investment returns – for that, one needs to look at the total return, of which a fundamental component is dividends. Indices, when looked at in isolation, don’t paint a particularly accurate picture however. With the market down some 20% of its all-time peak in mid-January, it is far from difficult to appreciate how those who question the risk/reward equation of equity investment might feel somewhat vindicated. And yet here we are: at the beginning of August 2020, the FTSE 100 is hovering around 6,000 – albeit in unprecedented circumstances as markets come to terms with the far-reaching impact of the COVID-19 coronavirus pandemic. Few would have contemplated that, a little over 20 years later, the index would be lower. On new year's eve 1999, the FTSE 100 index of the UK's largest companies stood at a peak of 6,930. We were at the height of the internet boom and any business with 'dotcom' in its name was likely to be amongst the most sought-after stocks in town.

Microsoft stock profit calculator dividend