Calculate total return, annualized return, and alpha for stock investments with dividend reinvestment and benchmark comparison.
The headline gain you quote for a stock is usually just the price move, and that quietly ignores the dividends paid along the way. This tool takes a buy price, sell price, dividend stream, and holding period, and returns three figures: total return, annualized return, and alpha against a benchmark you supply, with dividend reinvestment either on or off. The figure that surprises most people is annualized return: compounding shrinks big totals, so a 50% gain over five years is only about 8.4% per year, and a 2x gain over ten years is about 7.2% annually.
A concrete input and expected output from the current implementation.
Input
Buy 100 shares at $50.00 per share; annual dividend $2.00 per share, reinvested; sell after 5 years at $50.00 per share.
Expected output
Final position 121.67 shares, ending value $6,083.26. Total return 21.67%. Annualized return 4.00%.
The price never moved, so every dollar of gain came from reinvested dividends. Each $2 dividend bought more shares, and $5,000 x 1.04^5 = $6,083.26, so the annualized return lands exactly on the 4% dividend yield.
The calculator tracks shares, not dollars. Reinvested dividends buy fractional shares at the then-current price, so the position grows like a compounding account; dividends taken as cash are added separately. Total return is ending value divided by money put in, minus one. Annualized return is the constant per-year rate that reproduces the total: (1 + total return)^(1/years) - 1.
Supply a benchmark such as the S&P 500 with its return over the same dates, and alpha is the portfolio's return minus the benchmark's return for that identical period. Positive alpha means the stock beat the index after dividends; negative means it lagged. Matching the dates matters more than any other setting here.
Because annualized return is the per-year rate that compounds to your total: it spreads the whole period into equal years, so it shrinks as the hold lengthens. A 50% total gain over five years is about 8.4% per year; over ten years it is about 4.1%. That is compounding working backward, not an error.
No. Results are gross of taxes, commissions, and inflation, and reinvestment assumes the full dividend buys shares. For a taxable account, dividends and capital gains get taxed, so the actual after-tax return will be lower; the gap grows the longer you hold and the higher the yield.
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