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Total Shareholder Return (TSR)

Total Shareholder Return (TSR) is a performance measure that calculates the total return to shareholders over a specific period, including both capital gains (from stock price appreciation) and dividends paid. TSR is expressed as a percentage and is a key metric for evaluating the performance of a company from an investor’s perspective. It allows shareholders to assess the overall profitability of their investment, including income from dividends and changes in stock price.

Example

A shareholder purchases stock at $50 per share, and over one year the stock price increases to $60, with $2 in dividends paid. The TSR for that year would be 24% [($10 + $2) / $50].

Key points

• Measures the total return to shareholders, including capital gains and dividends.

• Expressed as a percentage over a specific time period.

• A key metric for evaluating the performance of a company from an investor’s perspective.

Quick Answers to Curious Questions

It provides a comprehensive view of the return on investment, accounting for both stock price appreciation and dividend payments.

TSR includes both capital gains and dividends, while capital gains focus only on the increase in stock price.

Companies can increase TSR by growing their stock price through business performance and increasing dividend payouts.
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