Question

Which two components make up the total return to an investor in a share of stock?

   Which two components make up the total return to an investor in a share of stock?

Fundamentals of Corporate Finance, 2nd Edition

Fundamentals of Corporate Finance, 2nd Edition

Jonathan Berk, Peter… 2nd Edition

Chapter 7, Problem 2

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This is the change in the value of the stock over time. Show more…

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Which two components make up the total return to an investor in a share of stock?

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Key Concepts

Dividends

Dividends are distributions of a company's earnings paid out to shareholders, often in the form of cash payments, and represent the income component of a stock's return. They provide a steady stream of income and reflect the company’s profitability and its commitment to sharing profits with investors.

Capital Gains

Capital gains refer to the increase in the value of a stock over time. This component of total return is realized when the stock is sold at a higher price than its purchase price and represents the growth aspect of an investment's return.

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