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when investing in a stock, will recieving a dividend increase or decrease your holding period return?

when investing in a stock, will recieving a dividend increase or decrease your holding period return?
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Answer #1

Holding period return is the return earned by holding a security/stock during a period. It is the sum of Capital Gain yield and Dividend yield earned with respect to the amount invested in stock.

Therefore, while investing in stock receiving dividend will INCREASE our Holding Period Return.

This can be illustrated with the below formulae:

[where,

HPR is Holding Period Return,

P1= Price of stock at the end of the year

P0= Price of stock in the beginning of the year OR the amount invested.

D1= Dividend Received during the year]

,

Thus, receiving dividend will add up to the Dividend Yield which in turn will increase the return earned by holding the stock during the period that is HPR.  

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