An investor buys 100 shares of a stock at $45 each. After one year, the stock appreciates by 20%, but the investor also receives a dividend of $2 per share. What is the investor's total return on investment after one year?

February 22, 2026

Investment Return Breakdown: How Much Did the Investor Really Earn?

When investing in stocks, understanding both capital appreciation and dividends is crucial to calculating your true return on investment (ROI). This article walks through a practical example of a one-year investment strategy: buying shares, watching them appreciate, and collecting dividends.

The Investment Setup

An investor purchases 100 shares of a stock at $45 per share. At the end of the year:

The stock price increases by 20%
The investor receives a $2 dividend per share

Step 1: Calculate the Purchase Cost

Total initial investment = 100 shares × $45 = $4,500

Step 2: Calculate the Sale Proceeds After Appreciation

A 20% increase on the original price of $45 raises the share price to: $45 × 1.20 = $54

Selling 100 shares at $54 each yields: 100 × $54 = $5,400

Step 3: Calculate Total Dividend Income

The investor receives a $2 per share dividend, so total dividend income is: 100 shares × $2 = $200

Step 4: Compute Total Return

Total return = Sale proceeds + Dividends – Initial investment = $5,400 + $200 – $4,500 = $1,100

Step 5: Calculate Percentage Return on Investment (ROI)

Return on investment (ROI) percentage is: (Total Return / Initial Investment) × 100 = ($1,100 / $4,500) × 100 ≈ 24.44%

Summary: Investor’s Total Return After One Year

Purchase cost: $4,500
Total proceeds (sale + dividends): $5,600
Total return (profit): $1,100
ROI: +24.44%

Why This Matters for Investors

This example demonstrates that returns come not just from stock price increases, but also from dividends. Including dividends in ROI calculations gives a more accurate picture of financial growth. In this case, a straightforward $45-to-$54 move with a $2 per share payout delivered a strong 24.44% annual return — a solid return for a one-year investment.

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Start calculating your own returns today — every dollar compounds with smart reinvestment and dividend capture.