1. What is Expected Return on Stock?

The expected return on a stock is the total return an investor anticipates earning from a stock investment. It combines dividend yield and expected capital appreciation (growth).

2. How Does the Calculator Work?

The calculator uses the expected return formula:

Where:

• \( Dividend \) — Expected annual dividend per share
• \( Price \) — Current stock price
• \( Growth \) — Expected annual growth rate (as percentage)

Explanation: The formula calculates the dividend yield (dividend/price) and adds the expected growth rate to determine total expected return.

3. Importance of Expected Return Calculation

Details: Calculating expected return helps investors compare different investment opportunities and make informed decisions about portfolio allocation.

4. Using the Calculator

Tips: Enter the expected annual dividend in dollars, current stock price in dollars, and expected annual growth rate as a percentage. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's a good expected return for stocks?
A: Historically, the average annual return for stocks is about 7-10%, but this varies by market conditions and individual stocks.

Q2: Should I use trailing or forward dividend?
A: For forward-looking estimates, use the expected future dividend. For current yield, use trailing twelve months dividend.

Q3: How do I estimate growth rate?
A: Growth can be estimated based on historical growth, analyst projections, or company guidance.

Q4: Does this account for risk?
A: No, this is a simple return calculation. Higher expected returns typically come with higher risk.

Q5: Can I use this for other investments?
A: This formula is specifically for dividend-paying stocks. Other investments may require different return calculations.