What this calculator does
Holding period return is the complete return from an investment over whatever period it was held, counting both the change in price and any income received along the way. It is the simplest honest measure of how an investment actually did.
Splitting it into its two parts is what makes it useful. A share bought at $100, now worth $120, having paid $7.50 of dividends, returned 27.5 per cent: 20.0 per cent from the price and 7.50 per cent from income.
The formula
The price change divided by the purchase price gives the capital gains yield, and the income divided by the same purchase price gives the income yield. Adding them gives the total holding period return.
| Term | Meaning |
|---|---|
| Holding period return | Total return over the period held, counting price change and income. |
| Capital gains yield | The portion from the change in price. |
| Income yield | The portion from dividends, interest or rent, measured against the purchase price. |
The inputs explained
| Field | What to enter |
|---|---|
| Bought price per share ($) | The price paid per share or unit. |
| Current (or sold) price per share ($) | The current price, or the price at which it was sold. |
| Income received per share (dividends etc.) ($) | Total income received per share over the holding period. |
When to use it
Measuring how an investment did
Price alone understates the return on anything that pays income.
Separating income from growth
Two investments with the same total return may be very differently composed.
Comparing against a benchmark
Total return is the correct basis, since indices are usually quoted that way.
Worked examples
Every figure in the tables below is produced by this page’s own calculator at build time, so the numbers and the tool always agree. Select any row to load that scenario.
How do price and income combine?
The same income at three ending prices.
Questions
Is this an annual return?
No, and that is the main thing to watch. It covers whatever period the investment was held. A 27.5 per cent return over five years is very different from the same figure over one, and annualising is needed to compare them.
How do I annualise it?
Take one plus the holding period return, raise it to the power of one over the number of years, and subtract one. Simply dividing by the number of years overstates the result by ignoring compounding.
Why measure income against the purchase price?
Because the return should be measured against what you actually committed. Measuring dividends against the current price gives the dividend yield a new buyer would receive, which is a different question.
Does it account for reinvested income?
No. It assumes income was taken rather than reinvested. Reinvesting would compound the return, which requires a total return calculation that tracks each reinvestment.
For annualised returns on a bond, see the bond yield to maturity calculator. For a risk-adjusted view, see the Sharpe ratio calculator.