A stock purchased for $100 with a year-end price of $110 and a $2 per-share dividend yields what total return?

A stock purchased for $100 with a year-end price of $110 and a $2 per-share dividend yields what total return?

• A. 12%
• B. 10%
• C. 8%
• D. 2%

Answer: (A)

Total return comes from both price appreciation and the dividend, relative to your initial investment. The price rises from 100 to 110, a 10% gain. You also receive a 2 per-share dividend, which adds 2% of the initial 100. So the total return is [(110 − 100) + 2] / 100 = 12%. The holding period return is 12%, reflecting both the capital gain and the dividend income.

Total return comes from both price appreciation and the dividend, relative to your initial investment. The price rises from 100 to 110, a 10% gain. You also receive a 2 per-share dividend, which adds 2% of the initial 100. So the total return is [(110 − 100) + 2] / 100 = 12%. The holding period return is 12%, reflecting both the capital gain and the dividend income.