Total shareholder return (TSR) is a financial metric that measures the total return an investor receives from an investment in a company’s stock over a specified period. It provides a comprehensive view of the overall performance of an investment.
Total shareholder return is calculated using the following formula:
TSR = capital gain (or loss) + dividends
TSR provides a holistic view of how an investment in a particular stock has performed, considering both changes in stock price and income from dividends. Furthermore, TSR allows investors to compare the performance of a particular stock or investment portfolio with a chosen benchmark index or with other investments in the same industry or sector.
High TSR may indicate high returns, but it could also be associated with higher risk or volatility. On the other hand, low TSR may suggest lower returns but could be linked to lower risk.
Have in mind that TSR doesn’t consider what an investor could have earned by investing the same capital in an alternative opportunity.