ACCA Applied Skills · Financial Management · The nature and purpose of financial management
Zenith plc has 10 million shares in issue. At the start of the year the share price was $4.00. During the year the company paid a total dividend of $0.30 per share and the closing share price was $4.30. Which of the following is the total shareholder return (TSR) for the year?
Total shareholder return is the share price gain plus dividends, divided by the opening share price. Here the gain is $0.30 and the dividend is $0.30, giving $0.60 on $4.00, which is 15.0%. Using only one component would give 7.5%.
- A7.5%
- B15.0%Correct
- C12.5%
- D7.0%
Explanation
TSR = (capital gain + dividend) / opening price. Capital gain = 4.30 - 4.00 = 0.30; dividend = 0.30; total = 0.60. 0.60 / 4.00 = 15.0%. The 7.5% option counts only the capital gain (or only the dividend), omitting one component of return.
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