Difference between revisions of "Total shareholder return"

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(TSR). A measure of the total rate of return to shareholders for the period under review, based on:
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(TSR).  
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A measure of the total rate of return to shareholders for the period under review, based on:
  
 
1. The opening value of the shares;
 
1. The opening value of the shares;
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2. Dividends received by the investor;
 
2. Dividends received by the investor;
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3. Any capital returned to the investor;
 
3. Any capital returned to the investor;
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4. Any further capital paid in by the investor; and
 
4. Any further capital paid in by the investor; and
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5. The closing value of the shares.
 
5. The closing value of the shares.
  
 
The TSR is calculated as the Internal rate of return (IRR) of all of these items, taking account of their timing as well as their amounts.
 
The TSR is calculated as the Internal rate of return (IRR) of all of these items, taking account of their timing as well as their amounts.
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Taking a simple example with only:
 
Taking a simple example with only:
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Opening value of each share at Time 0 = $100;
 
Opening value of each share at Time 0 = $100;
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Dividend per share paid one year later at Time 1 = $4;
 
Dividend per share paid one year later at Time 1 = $4;
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Closing value of each share at Time 1 = $106.
 
Closing value of each share at Time 1 = $106.
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And no other changes.
 
And no other changes.
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The total relevant cash flows for the investor are:
 
The total relevant cash flows for the investor are:
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Time 0 outflow = $(100)
 
Time 0 outflow = $(100)
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Time 1 total inflow = $4 + $106 = $110.
 
Time 1 total inflow = $4 + $106 = $110.
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The IRR of these cash flows is 10%: $(100) + $110 x 1.10<sup>-1</sup> = $0.
 
The IRR of these cash flows is 10%: $(100) + $110 x 1.10<sup>-1</sup> = $0.
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So the TSR for the year under review is 10%.
 
So the TSR for the year under review is 10%.
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== See also ==
 
== See also ==
 
* [[Internal rate of return]]
 
* [[Internal rate of return]]
 
 

Revision as of 13:32, 14 August 2013

(TSR).

A measure of the total rate of return to shareholders for the period under review, based on:

1. The opening value of the shares;

2. Dividends received by the investor;

3. Any capital returned to the investor;

4. Any further capital paid in by the investor; and

5. The closing value of the shares.

The TSR is calculated as the Internal rate of return (IRR) of all of these items, taking account of their timing as well as their amounts.


Taking a simple example with only:

Opening value of each share at Time 0 = $100;

Dividend per share paid one year later at Time 1 = $4;

Closing value of each share at Time 1 = $106.

And no other changes.


The total relevant cash flows for the investor are:

Time 0 outflow = $(100)

Time 1 total inflow = $4 + $106 = $110.


The IRR of these cash flows is 10%: $(100) + $110 x 1.10-1 = $0.

So the TSR for the year under review is 10%.


See also