How to Calculate Rate Earned in Common Stock

Stock price is only half the equation when figuring returns.

Stock price is only half the equation when figuring returns.

Investing in common stock allows you to purchase a small fraction of a company and watch your investment grow as the company profits. Common stock generates returns not only by growing, but also through paying dividends -- so account for both when figuring the rate of return it earns.

Subtract the price you paid for the stock from the selling price. If you still own the stock, use the current price instead. For example, if you paid $30 and it's now worth $33, subtract $30 from $33 to get a gain of $3.

Add any dividends received while you owned the stock to the gain from the price increase. In this example, if you received another $1.50 in dividends while owning the stock, add $1.50 to $3 to find your total gain is $4.50.

Divide your gain by the price you paid for the stock to calculate your rate of return. In this example, divide $4.50 by $30 to find the rate of return equals 0.15, or 15 percent.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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