The only company traded on the Slovak stock exchange that currently pays dividends is Biotika. It is a Slovak pharmaceutical manufacturer. It pays a dividend of 0.50 euros per share. The last price of Biotika shares is 23 euros each. Therefore, for 1000 euros, it is possible to buy 43 shares. The received dividend amounts to 21.5 euros. What is the return on such an investment after accounting for inflation and dividend tax?
Calculation:
Taxation of distributed profits of the company is 7 percent Received dividends after taxation:
21.5 x 0.93 = 19.995 = 20 euros after rounding
Nominal return on investment of 1000 euros: (20/1000)x100 = 2 percent
Real return (after accounting for 3.2 percent inflation) on investment of 1000 euros:
Real interest rate = 2 – 3.2 = –1.2 percent Real return = (1000/1.012) – 1000 = –11.86 euros
Unlike guaranteed deposits or investments, no one can guarantee returns to investors in stocks.
Furthermore, it's essential to realize that past returns do not indicate future returns. In other words, when you see growth or profit in 2021, it doesn't mean you can expect growth or profit in 2022.
