The share price of a stock is affected by corporate actions such as dividend payments and stock splits. Each time one of these events occurs, it changes the share price in a manner that complicates the calculation of the return an investor earns on the stock. The adjusted share price of a stock allows you to make a quick and dirty return calculation between any two dates for a stock.
Look up and write down the adjusted close price for the two dates between which you want to calculate a stock's return. For example, on December 31, 1999, the adjusted close for IBM was $91.69 per share. On December 31, 2012, the IBM adjusted close was $190.75 per share.
Subtract one adjusted closing price from the other. If the stock has gained value, the older price is subtracted from the most recent. In the IBM example, the difference is $99.06.
Divide the price difference by the oldest share price and multiply times 100. The result will be the total return percentage on the stock, including dividends, for the time period involved. For the IBM example, the price difference of $99.06 is divided by the 1999 closing price of $91.69 for a total return over the 12 years of 108 percent.
- Most companies' websites allow you to find adjusted closing prices on the investor relations page. You can also find such prices in Yahoo's finance section.
- The adjusted close on a particular date changes every time a stock split is declared or a dividend paid. So each time your stock pays a dividend the adjusted close changes for each day all the way back to the beginning of time.
- Calculating total return using adjusted close numbers gives a moderately accurate result. Differences arise due to adjusting share price for dividends compared to getting cash into a brokerage account and rounding errors for stocks that have been around a long time and have gone through many splits and dividend payments.
- If the recent price is lower than the older stock price, the result is a percentage loss.
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