A tool designed to compute the overall profit or loss from an equity investment considers both capital appreciation and dividend distributions over a specific period. For example, if a share was purchased for $50 and sold for $60, with $2 in dividends received during the holding period, the tool would calculate a total return of $12 or 24%.
Accurate profit assessment is essential for informed investment decisions. Understanding the complete return, incorporating both price changes and income generated, provides a more realistic picture of investment performance than focusing solely on the sale price. This comprehensive approach to evaluating investment results has gained increasing prominence as investors recognize the significant contribution of dividends and other distributions to overall portfolio growth.