PT - JOURNAL ARTICLE AU - Alfred Rappaport TI - Dividend Reinvestment, Price Appreciation and Capital Accumulation AID - 10.3905/jpm.2006.628413 DP - 2006 Apr 30 TA - The Journal of Portfolio Management PG - 119--123 VI - 32 IP - 3 4099 - https://pm-research.com/content/32/3/119.short 4100 - https://pm-research.com/content/32/3/119.full AB - Studies of historical stock market performance invariably focus on total shareholder return (TSR). Contrary to its name, TSR does not represent the return earned by equity investors but is instead the capital accumulation rate investors achieve if they purchase shares at the start date, reinvest all dividends to buy additional shares, and hold all shares to the terminal date. Investors who use historical TSR rates as a point of departure for establishing their assumed capital accumulation rates can be misled in two ways. First, because only the rare investor can afford to reinvest all dividends and sell no shares over a lifetime, the capital accumulation rate will almost always be lower than the TSR rate. Second, the remarkable historical growth in accumulated capital from reinvested dividends can mistakenly persuade some investors that dividends, rather than price appreciation, govern investment performance. Departures from 100% dividend reinvestment affect capital accumulation, and once investors make the dividend reinvestment decision, capital accumulation depends entirely on price appreciation.TOPICS: Long-term/retirement investing, equity portfolio management, wealth management