It is known that an investor purchases a share in order to generate income. This is possible in two ways: depending on changes in the market price of a share and depending on the amount of dividends received. The profitability of a stock is the main indicator that interests an investor.
Instructions
Step 1
Remember that the return on a share is the ratio of the earnings per share to its market value. This value is directly proportional to the growth of the share price and the size of the dividend. The latter is, as a rule, less important for an investor than a change in the value of a share. Investors are more interested not in the return on one share, but in the total return on the portfolio they have acquired.
Step 2
Please note that the return on the stock will depend on the income received as a result of the growth in the market value of the security and the amount of dividends. When calculating the profitability, it is necessary to determine the period, i.e. time for which the owner of the share will make a profit. Stock returns can be either positive or negative.
Step 3
Let's look at an example. The investor bought a share on April 1 for 180 rubles, and on September 1 sold it for 200 rubles. The yield will be: (200-180) / 180 x 100% = 11.1%. That is, for the specified period, the investor received a yield of 11.1%.
Step 4
In order to calculate the annual profitability, use the formula: profitability = profit / investment amount x 365 (366) / share holding period x 100%. In our example, the annual return will be: 20/180 x 365/153 x 100% = 26.5%. That is, the investor held the share for 153 days and received a yield of 26.5%.
Step 5
Dividend yield is calculated as the ratio of the dividend per share to the current market price of the share. The higher this indicator, the more attractive the shares are for the buyer. But according to this formula, only the profitability in the previous period can be estimated. The results of the company's work in the future cannot guarantee the same level of profitability this year.
Step 6
Therefore, you can calculate the prospective dividend yield. It is defined as the ratio of the expected dividend per share to the current market value of the share. In this case, the expected dividend level can be calculated on the basis of the paid interim dividends.
