# Total Shareholder Return (TSR): Definition and Formula

![Total Shareholder Return (TSR): Looking at capital gains and dividends to measure the full amount an investor earns from a stock.](https://www.investopedia.com/thmb/OZw013ibeqyOnHF9khrMRLaOyzI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Tsr_sketch_final-030d21e284484cc1947a10c9cdd48166.png)

*High TSR typically indicates high returns, although it could be associated with higher risk. — Michela Buttignol / Investopedia*

> **Definition**
>
> Total shareholder return (TSR) calculates how much an investor receives from a stock over a specific period, taking both capital gains and dividends into account.

## What Is Total Shareholder Return (TSR)?

Total shareholder return (TSR) is the sum total of what a stock has returned to those who invested in it.

To arrive at its total, usually expressed as a percentage, TSR factors in [capital gains](https://www.investopedia.com/terms/c/capitalgain.asp) and [dividends](https://www.investopedia.com/terms/d/dividend.asp) from a stock; it might also include special distributions, stock splits, and warrants. It measures financial performance, indicating the total amount an investor reaps from an investment—specifically, equities or shares of stock.

### Key Takeaways

*   Total shareholder return (TSR) measures how much an investor receives from a stock over a specific period.
*   TSR factors in capital gains and dividends when measuring the total return generated by a stock.
*   The formula for calculating TSR is { (current price - purchase price) + dividends } ÷ purchase price.
*   TSR represents an easily understood figure of the overall financial benefits generated for stockholders.
*   TSR is a good gauge of an investment’s long-term value, but it only looks back to past performance.

## Understanding Total Shareholder Return (TSR)

An investor makes money from stock in two basic ways: capital gains and current income. A capital gain is a change in the market price of the stock from the time it was purchased to the date it was sold (or the current price if it is still owned)—profits, in other words. [Current income](https://www.investopedia.com/terms/c/currentincome.asp) is the dividends paid out by the company from its earnings while the investor still owns the stock.

When calculating TSR, an investor can only consider the dividends they actually received or were eligible to receive. For example, they may own the stock on the day the dividend is payable, yet they receive the dividend only if they owned the stock on or before the [ex-dividend date](https://www.investopedia.com/terms/e/ex-date.asp). Therefore, an investor needs to know the stock’s ex-dividend date rather than the dividend payment date when calculating TSR.

> **Fast Fact**
>
> Dividends, which are per-share distributions of some of a company’s earnings to certain classes of its stockholders, can include one-time payments or regular quarterly or semiannual cash payouts. Besides dividends, another way that companies return cash to shareholders is through stock buyback programs.

TSR is most useful when measured over time, as it shows the long-term value of an investment, the most accurate metric for gauging success for most individual [investors](https://www.investopedia.com/terms/i/investor.asp).

## Examples of Total Shareholder Return (TSR)

Total shareholder return is calculated as the overall [appreciation](https://www.investopedia.com/terms/a/appreciation.asp) in the stock’s price per share, plus any dividends paid by the company, during a particular measured interval; this sum is then divided by the initial purchase price of the stock to arrive at the TSR.

As a mathematical equation, it would be:

$\begin{aligned}&\text{TSR} = \frac { ( \text{Current Price} - \text{Purchase Price} ) + \text{Dividends} }{ \text{Purchase Price} } \\\end{aligned}$

### Hypothetical Example of TSR

As an example, let’s assume that an investor bought 100 shares of a company’s [stock](https://www.investopedia.com/terms/s/stock.asp) at $20 per share (for a total investment of $2,000). The stock, which they still own, is now trading at $24 per share. Since the investor bought the stock two years ago, the company has paid out a total of $4.50 in dividends per share.

What is the investor’s TSR over those two years? It would be calculated as:

*   $24 - $20 (current share price minus original purchase price) = 4
*   _plus_ $4.50 (the amount of dividends per share received) = 8.5
*   _divided by_ $20 (original per-share purchase price) = 0.425
*   _multiplied by_ 100 to get a percentage = 42.5%

So, the TSR would be 42.5%. As an equation:

$\begin{aligned}\text{TSR} &= \big ( (\$24 - \$20) + \$4.50 \big ) \div \$20 \\&= 0.425 \times 100 \\&= 42.5\% \\ \end{aligned}$

Note: If you prefer to think of TSR in dollar terms vs. percentage, you would simply do the first two steps above, to have $8.50 per share as your total shareholder return, aka “stock return cash value” as it’s called in this form.

### Real-Life Example of TSR

For the period of 2021 through 2024, Microsoft Corp. ([MSFT](https://www.investopedia.com/markets/quote?tvwidgetsymbol=MSFT)) had a TSR of 19.8% for investors who had held it for that entire period. Of that amount, 19.2% came from an increase in share price, and 0.6% was returned from dividends.

> **Important**
>
> TSR can also be considered the internal rate of return (IRR) of all cash flows to an investor during the period they’ve held their shares.

## Advantages and Disadvantages of Total Shareholder Return (TSR)

TSR is best used when analyzing [venture capital](https://www.investopedia.com/terms/v/venturecapital.asp) and [private equity](https://www.investopedia.com/terms/p/privateequity.asp) investments. These investments typically involve multiple cash investments over the life of the business and a single cash outflow at the end through an [initial public offering (IPO)](https://www.investopedia.com/ask/answers/012015/what-difference-between-ipo-and-seasoned-issue.asp) or sale.

Because TSR is expressed as a percentage, the figure is readily comparable with industry benchmarks or companies in the same sector. However, it reflects the past overall return to shareholders without consideration of future returns.

TSR represents an easily understood figure of the overall financial benefits generated for stockholders. The figure measures how the market evaluates the overall performance of a company over a specific time period. However, TSR is calculated for publicly traded companies at the overall level, not at a divisional level.

In addition, TSR is externally focused and reflects the market’s perception of performance; therefore, TSR could be adversely affected if a fundamentally strong company’s share price suffers greatly in the [short term](https://www.investopedia.com/terms/s/shortterm.asp) for whatever reason—like negative publicity or quirky stock market behavior or sentiment.

TSR does not measure the absolute size of an [investment](https://www.investopedia.com/terms/i/investment.asp) or its [return](https://www.investopedia.com/terms/r/return.asp). For this reason, TSR may favor investments with high rates of return even when the dollar amount of the return is small. For example, a $1 investment returning $3 has a higher TSR than a $1 million investment returning $2 million. In addition, TSR does not take into consideration the cost of capital and cannot compare investments over different time periods.

Pros

*   Simple to calculate, easy to understand
    
*   More complete evaluation of investment’s worth
    
*   Easy to compare to other companies or benchmarks
    
*   Good gauge of long-term performance
    

Cons

*   Limited to past performance, no sense of future returns
    
*   Sensitive to stock market performance, like nearly any [metric](https://www.investopedia.com/terms/m/metrics.asp)
    
*   Doesn’t reflect size of investment
    

## What Does Total Shareholder Return Do?

Total shareholder return (TSR) is a way to evaluate an investment’s performance. It factors in capital gains and dividends to measure the overall returns an investor earns from a stock.

## How Is TSR Measured?

TSR, short for total shareholder return, measures the appreciation in the price of a stock’s shares, plus the total sum paid in dividends per share, over a specific time period.

## How Do You Calculate Total Shareholder Return?

To calculate total shareholder return (TSR), first, subtract a stock’s current price per share from the price originally paid for it. Then add the dollar amount of dividends received per share, along with any other special distributions or payouts (like from a stock buyback, for example). Divide this sum by the stock’s purchase price per share. Multiply by 100 to arrive at a percentage figure for the TSR.

## The Bottom Line

Total shareholder return (TSR) is a way to determine how much your investment has made for you—how much additional money your capital has earned in a specific time period. It takes into account both appreciation in a stock’s shares and the dividends paid on those shares. It has its limitations—what financial metric does not?—but overall, it provides a more complete sense of your return on a stock than simply gauging the gain in the stock price.

> **Article Sources**
>
> 1.  Trefis. “[Microsoft Total Shareholder Return (TSR): 32.9% in 2024 and 19.8% 3-Yr Compounded Annual Returns (Above Peer Average)](https://www.trefis.com/data/companies/MSFT/no-login-required/P8mCU7Dp/Microsoft-Total-Shareholder-Return-TSR-33-0-in-2024-and-20-7-3-yr-returns-above-peer-average-).”