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Calculating Total Shareholder Return

Checklist Description

This checklist considers the importance of the overall returns delivered to shareholders and outlines two alternative methods of calculation.

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When assessing the performance of stocks, inexperienced investors risk falling into the trap of looking purely at stock price movements, in the process ignoring the value of dividends which may be paid. Total shareholder return (TSR) over a period is defined as the net stock price change plus the dividends paid during that period. While it is possible that a stock could deliver a negative price performance over a certain period yet still generate a positive total shareholder return should the dividend paid outweigh the stock price fall, in practice this happens only rarely. In most markets, the dividend yield indicators are low, with the result that stock prices are generally the key driver of TSR. However, the importance of the dividend component of the total return calculation is typically more significant in traditionally higher-yielding areas of the stock market such as utilities, tobacco companies, and beverage producers.

Total shareholder return over a period can be calculated as follows:

Total shareholder return = (Stock priceEnd of period − Stock priceStart of period + Dividends paid) ÷ Stock priceStart of period

Importantly, when calculating TSR, we must take account of only the dividends that our period of ownership of the stock entitles us to receive, so we need to take account of the stock ex-dividend date rather than the dividend payment date. It could be that we own the stock on the day when the dividend is actually payable, yet we would only be entitled to receive the dividend had we owned the stock on the ex-dividend day.

An alternative ways of thinking of total shareholder return is the internal rate of return of all cash flows paid to investors during a particular period. However, whichever method we choose to calculate total shareholder return, the result essentially represents an indication of the overall return generated for stockholders, expressed in percentage terms. In all cases, the “dividends paid” element of the calculation should also include any special cash payments returned to stockholders, as well as any stock buyback programs. The figure should also take account of any special one-off dividend payments, as well as regular dividend payouts.

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  • TSR represents a readily understood figure of the overall financial benefits generated for stockholders.

  • The figure can be interpreted as a measure of how the market evaluates the overall performance of a company over a specified period.

  • Given that TSRs are expressed in percentage terms, the figures are readily comparable between companies in the same sector.

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  • TSRs can be calculated for publicly traded companies at the overall level, but not at a divisional level.

  • The calculation is not “forward looking” in that it reflects the past overall return to shareholders, with no consideration of future returns.

  • TSR is externally focused in that it reflects the market’s perception of performance; it could, therefore, be adversely impacted should a share price of a fundamentally strong company suffer excessively in the short term.

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Action Checklist

  • Calculate the share price change over the specified period plus any dividends paid to generate a simple TSR calculation.

  • If necessary, be prepared to make adjustments for special events such as share buybacks and/or splits in stocks’ prices.

  • Investors can use TSR percentages to make comparisons against industry benchmarks.

  • From a company perspective, remuneration packages can be linked to TSR.

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Dos and Don’ts


  • Consider how TSR calculations might be applied to mutual funds as well as company stocks, thus taking account of income paid out by yield-orientated funds when looking at their annual performance.

  • However, remember that TSR reflects past performance rather than a perception or indication of future returns.


  • Don’t forget that past performance shouldn’t be taken as the best guide to future returns.

  • Don’t look to calculate TSR for privately held companies as the calculation requires stock price inputs.

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Further reading


  • Ward, Keith. Marketing Strategies: Turning Marketing Strategies into Shareholders Value. Burlington, MA: Butterworth-Heinemann, 2004.
  • Young, David S., and Stephen F. O’Byrne. EVA and Value Based Management. New York: McGraw-Hill, 2000.


  • Elali, Wajeeh. “Contemporaneous relationship between EVA and shareholder value.” International Journal of Business Governance and Ethics 2:3–4 (October 2006): 237–253. Online at:
  • Gardner, Tim, and Eric Spielgel. “Total shareholder return: Planning a perfect future.” Public Utilities Fortnightly 144:1 (January 2006): 45–50.

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