Stock market basics · updated October 21, 2026
What is total return and how is it calculated
Total return adds up everything an investment gave you: the rise in price and the dividends received, compared with the amount invested. It is the only fair number when you compare a stock that pays dividends with one that does not.
Total return formula
- Dividends received
- All dividends collected over the period, per share.
Worked example
You bought a share for $100. It now costs $108, and you received $4 in dividends along the way.
Looking only at the price, you would have seen 8%. Dividends added another 4 points.
Worth knowing
Indices come in two versions too: price only, and with dividends reinvested. Over decades, the gap between them is very large.
When total return can fool you
Taxes and fees lower the real return; the calculation above is before them. Different periods: a 5-year total return has to be annualized (CAGR) before you compare it with a 1-year figure.
Related terms
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Questions about total return
Why total return and not just the price?
Because a big part of stock market gains comes from dividends. Without them, companies that pay a lot look weaker than they are.
These explanations are for information only. They are not a recommendation to buy or sell.
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