One of the recent feature requests we’ve had as part of Stockopedia Premium is to provide Total Shareholder Return charts over different timeframes – that got us to thinking a bit more about TSR and why it’s useful. What’s interesting is that you don’t see TSR on that many data websites (for stocks, at least – funds is a different story) but you can usually find it on individual company websites, not least because it’s a big element in management compensation packages! According to Management Today, in the majority of FTSE 100 companies, performance against this measure is now used as the basis for calculating the major component of directors’ bonuses.
What is Total Shareholder Return?
Share-price based measures like relative strength are all very well but, when assessing stock market investments, it’s important not to fall into the trap of just looking purely at share price movements, while ignoring the value of dividend income. Total shareholder return (TSR) is intended to be he ultimate bottom line of investment performance. It measures the full returns earned by an investment over the period of ownership, including any dividend cashflows paid during that period. In essence, total shareholder return is the internal rate of return…
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