Shareholder Return per Share

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What is Shareholder Return per Share?

Shareholder Return per Share combines dividends and buybacks to represent the total value returned to shareholders on a per-share basis, providing a comprehensive view of shareholder returns.

How do you interpret Shareholder Return per Share?

Shareholder Return per Share combines dividends and buybacks, providing a complete picture of value returned to shareholders on a per-share basis.

How to Calculate Shareholder Return per Share?

Shareholder Return per Share is calculated by adding the capital gain (change in share price) and any dividends received over a specific period, divided by the initial share price.

Shareholder Return per Share = (Ending Share Price - Beginning Share Price + Dividends per Share) / Beginning Share Price

where

• Ending Share Price is the stock price at the end of the period.
• Beginning Share Price is the stock price at the start of the period.
• Dividends per Share are the dividends paid during the period.

Why is Shareholder Return per Share important?

This metric is important because it provides a comprehensive view of the returns shareholders receive, taking into account both stock appreciation and dividends. It is a key indicator of how well a stock has performed for investors over a specific time horizon.

How does Shareholder Return per Share benefit investors?

Investors benefit from Shareholder Return per Share as it offers a clear view of the total return they are earning from both dividends and price increases. It is particularly useful when comparing the performance of dividend-paying stocks with those that do not pay dividends, as it captures both aspects of return.

Using Shareholder Return per Share to Evaluate Stock Performance

Investors can use Shareholder Return per Share to gauge the success of their investment by comparing it to industry benchmarks or market indices. It provides a clear picture of whether the stock is generating sufficient returns, particularly in dividend-paying stocks, where dividends contribute a significant portion of total returns.

FAQ about Shareholder Return per Share

What is a Good Shareholder Return per Share?

A "good" Shareholder Return per Share varies by industry and market conditions. In general, a high return is desirable, but it must be sustainable. A stock that provides strong appreciation and consistent dividends is considered favorable.

What Is the Difference Between Metric 1 and Metric 2?

Shareholder Return per Share focuses on the return per share over a specific period, while Total Shareholder Return (TSR) typically annualizes the return and considers both capital gains and dividends over longer periods. TSR is commonly used to assess company performance over multiple years.

Is it bad to have a negative Shareholder Return per Share?

A low Shareholder Return per Share may indicate that a stock is underperforming compared to peers or the broader market. However, in volatile markets or for stocks focusing on long-term growth, short-term low returns may not necessarily reflect poor performance.

What Causes Shareholder Return per Share to Increase?

This metric increases when:

The stock price appreciates over time.
The company pays or increases dividends.

What are the Limitations of Shareholder Return per Share?

This metric does not account for risk or volatility. A stock with a high Shareholder Return per Share might also carry significant risk. Additionally, it does not reflect the company's financial health or growth potential outside the stock price and dividends.

When should I not use Shareholder Return per Share?

This metric may be less useful for evaluating stocks that do not pay dividends or for high-growth companies that reinvest earnings into the business instead of returning value to shareholders.

How does Shareholder Return per Share compare across industries?

Industries with mature companies, like utilities and consumer staples, often have higher Shareholder Returns per Share due to steady dividends. In contrast, industries like technology and biotech may offer lower Shareholder Returns per Share, focusing more on stock appreciation through growth instead of dividend payouts.

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