# What is the dividend-adjusted yield?

Dividend-adjusted yield is a calculation of the return on a stock that is based not only on capital appreciation but also on dividends received by shareholders. This adjustment provides investors with a more accurate assessment of the performance of an income-generating collateral over a specific holding period.

Yield explained by dividends

An investor can begin to calculate a simple return by taking the difference in the market price and the purchase price and dividing this by the purchase price. For example, let’s say an investor buys an Amazon share (amzn) on January 1, 2018 for \$ 1,172.00 and sells it on July 11, 2018 for \$ 1,755.00. the simple return would be (\$ 1,755.00 – \$ 1,172.00) / 1,172.00 = 49.74%. While Amazon currently does not pay dividends, if it issued a quarterly dividend of \$ 0.50 / share, and the investor received two distributions during the six months that they held the shares, they could adjust their performance by adding them to the sale price. Your dividend adjusted yield would be (\$ 1,756.00 – \$ 1,172.00) / 1,172.00 = 49.83%.

Total return is a similar calculation, taking into account both changes in market value and income streams, expressed as a percentage (that is, divided by the share price).

The adjusted closing price or adjusted dividend is another useful data point that takes into account distributions or corporate actions that occurred between the closing price of the previous day and the opening price of the next day. the price of the company could change, due to a stock split, for example. In a traditional stock split, a company splits its existing shares into multiple shares to increase liquidity. The most common split ratios are 2 for 1 or 3 for 1. This means that a shareholder will have two or three shares, respectively, for every share they have previously held.