Investment return calculation on a stock.?

If I bought 3,000 shares of stock yielding 3.5% annually what would be my return on this investment if the stock rose from $30/share to $36/share in a four year period assuming I reinvested the dividends and taxes were not of an issue? If you can figure this out, please show how you calculated the fugure.

To get the exact amount of total return, you would:
1) take the total value of all the stock (the original 3000 shares plus the ones added by reinvesting dividends) at the end of the four years
2) divide that by the amount you originally invested (3000 * whatever the share price was)

If you want to know the annualized return:
3) Raise the result from #2 to the power of 0.25 (1 divided by the number of years you had the stock, in this case 4.

For both cases, subtract 1 from the answer and multiply by 100 to get the answer in percent.

You didn't say what the price of the shares bought with the reinvested dividends were or how many shares were added that way, so I can't figure out the exact answer.

If we assume that you ended up with 3400 shares, the calculation would then be:
1) 3400 * 36 = 122,400
2) 122,400 / (3000 * 30) = 1.36 (total return = 36%)

3) 1.36 ^ (0.25) = 1.08 (annualized return = 8%)

If you're trying to estimate a future return and are guessing the stock price will be $36 in 4 years, then the best estimate you can make would be to take end price divided by start price raised to the 1/4 power, which gives 4.66%, then add the 3.5% dividend yield to get about 8.2%.

No way to know for sure, you can only calculate the return by the end of the year.

Do you invest dividends?

The yeild changes with each share price change, lower price, higher yield. You only get the dividend. So calculate shares owned times the dividend. Then add the value of the shares added by reinvesting. Subtract the total initial investment and cost. The end amount is your gain. Gain then divided by initial investment amount times 100 , total return in a percent.

Go to bloomberg.com and check under calculators.

There are easier ways to do this math, but I'll do it the long way so you can see the steps.

You have two forms of return: the dividend yield and the capital gain element. For this analysis, you cannot calculate annual return because you don't have enough assumptions, so this calculation is a total four-year ROI based on end-of-period calculations. Also, the analysis assumes yield % stays constant with a rising stock price so the dividend amount in dollars is increasing each year. Finally, the analysis assumes a share price that appreciates evenly over the 4-year period. Different assumptions will result in a different answer.

First the yield:


Year 0 = Purchase 3,000 shares $30/share = $90,000 invested.

End of Year 1 = 3000 shares x $31.50 per share ($30 per share purchase price plus appreciation of $1.50 per share = $6 four-year price appreciation divided by 4 years) = $94,500 x 3.5% = $3,307.50 in dividends. Total money invested now = $97,807.50. The dividends are reinvested. At a price of $31.50/share, you could buy an additional $3,307.5/$31.50 = 105 shares. Total share balance now 3,105 shares. Total value invested = 3,105 x $31.50 = $97,807.50.

Years 2-4 - follow the same logic. The year 2 starting number is $97,807.50. At the end of the year, the share price is $33 (($31.50 + ($6 price appreciation/4 years)), etc.

When you get to the end of year four, take the total money invested, divide it by the initial investment of $90,000 and you have the total 4-year ROI based on the assumptions outlined above.

Not enough info.

You need to know the timing of the dividend flows and subsequent reinvestment and the relevant prices.