If your stock's price per share does not increase, or even decreases, you may still make a profit if the stock pays dividends. When measuring the performance of a stock that pays dividends, if you do not account for the dividends, you do not get a true picture of the return. When measuring the return of a stock that pays dividends, you can measure return as a dollar figure or a percentage of the purchase price.
Subtract the initial price of the stock from the ending price. If your answer is negative, your stock decreased in value. For example, if you bought a stock for $35 and sold it for $32, you lost $3.
Add any dividends paid by the stock while you owned it. In this example, if the stock paid $1.20 in dividends, add $1.20 to $-3 to get $-1.80.
Divide the gain or loss after accounting for dividends by the purchase price to find the rate of return. In this example, divide $-1.80 by $35 to get -0.0514, or a loss of 5.14 percent.
References
- Stock Market Investors: How to Calculate Return on Investment
- Internal Revenue Service. "Topic No. 451: Individual Retirement Arrangements." Accessed Jan. 24, 2020.
- Internal Revenue Service. "Publication 550: Investment Income and Expenses," Page 4. Accessed Jan. 24, 2020.
- Internal Revenue Service. "Publication 550: Investment Income and Expenses," Page 19. Accessed Jan. 24, 2020.
- Internal Revenue Service. "Stocks (Options, Splits, Traders)." Accessed Jan. 24, 2020.
- Internal Revenue Service. "About Form 1099-DIV, Dividends and Distributions." Accessed Feb. 10, 2020.
- Internal Revenue Service. "2020 Instructions for Form 1099-DIV," Pages 1-4. Accessed Jan. 24, 2020.
- Internal Revenue Service. "Topic No. 404 Dividends." Accessed Feb. 10, 2020.
- Internal Revenue Service. "2020 Instructions for Form 1099-DIV," Pages 1-2. Accessed Jan. 24, 2020.
- Congressional Research Service. "The Taxation of Dividends: Background and Overview," Pages 1-2. Accessed Jan. 24, 2020.
Writer Bio
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."