What Is Total Return?

We know that it’s hard for newbies to navigate the stock market jungle.

Therefore, in this series, we make investing definitions as easy to understand as possible so that you are not left wandering.

Last week, we looked at what “capital gain” means.

Right now, we will delve into a new term, and that is “total return”.

So, what exactly is total return?

Total return is a stock‘s capital gain (in percentage terms) added to its dividend yield. 

In other words, the total return on an investment includes both capital appreciation and dividend income.

Say you bought a stock for $1 and sold it at S$1.05 at the end of one year; the capital gain you would get is S$0.05. In percentage terms, the return is 5% ((S$0.05/S$1) x 100%).

If the stock has a dividend yield of 3% per annum, your total return would, therefore, be 8% (5% + 3%).

Calculating total return gives a holistic performance of your stock or portfolio as opposed to looking at capital gain alone.

For more in the “What Is” series, you can head here.

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