How do I factor dividends and yield into the performance of a security?
Instead of a price chart can use a performance chart, which is usually expressed as a percentage increase from the original purchase price.  To factor in the dividends, you can either add in all of your dividends to the final price, or subtract the accumulated dividends from your cost basis (the initial price). Usually I've seen people treat the dividend like a separate cash flow, which is discounted if the company doesn't have a well-established dividend history. I've never really seen dividends rolled into a total return chart (except in the context of an article), probably because dividend reinvestment is a nightmare of record-keeping in a taxable account, and most folks don't do it. One of my brokers (TD Ameritrade) does allow you to plot dividend yield historically on their charts. "Good observation. In fact, the S&P index itself is guilty of not including dividends. So when you look at the index alone, the delta between any two points in time diverges, and the 20 return observed if one fails to include dividends is meaningless, in my my humble opinion. Yahoo finance will let you look at a stock ticker and offer you an ""adjusted close"" to include the dividend effect."
what do you mean exactly?  Do you have a future target price and projected future dividend payments and you want the present value (time discounted price) of those? Edit: The DCF formula is difficult to use for stocks because the future price is unknown.  It is more applicable to fixed-income instruments like coupon bonds.  You could use it but you need to predict / speculate a future price for the stock. You are better off using the standard stock analysis stuff: Learn Stock Basics - How To Read A Stock Table/Quote The P/E ratio and the Dividend yield are the two most important.  The good P/E ratio for a mature company would be around 20.  For smaller and growing companies, a higher P/E ratio is acceptable.  The dividend yield is important because it tells you how much your shares grow even if the stock price stays unchanged for the year. HTH Hart's answer regarding the difference between an index and a stock aside, remember that dividend yield is a passive measure.  It takes the announced dividend (which is a $/share amount) and divides it by the current market price.   So you can't assume that if you buy a stock that had a dividend yield of 4% for $100 that you're guaranteed 4% of the stock price in dividends.  If the price of the stock doubles, you'd still get $4, but the yield would drop to 2%.  Or the company could reduce (or even suspend) its dividends, which would reduce the yield if the stock price stayed flat. For an index like the S&P, it's easier to measure dividends on % yield terms rather then $/share terms since you'd have to own shares in every single company to get that amount, but on average the stocks in the S&P 500 pay X% in dividends (which are typically quarterly) - some pay more than that, some less, and some none at all. "I will add another point to ChrisinEdmonton's answer... I recognize that this is perhaps appropriate as a comment--or maybe 1/2 of an answer, but the comment formatting is inadequate for what I want to say.  The magic formula that you need to understand is this:  (Capital Invested) * (Rate of Return) = (Income per Period) When ChrisinEdmonton says that you need $300,000, he is doing some basic algebra... (Capital Required) = (Income per Period) / (Rate of Return)  So if you're looking at $12,000 per year in passive income as a goal, and you can find a ""safe"" 4% yield, then what ChrisinEdmonton did is:  $12,000 / 0.04 = $300,000 You can use this to play around with different rates of return and see what investment options you can find to purchase. Investment categories like REITs will risk your principal a little more, but have some of the highest dividend yields of around 8%--12%. You would need $100,000--$150,000 at those yields.  Some of the safest approaches would be bonds or industrial stocks that pay dividends. Bonds exist around 3%--4%, and industrial dividend stocks (think GE or UTX or Coca Cola) tend to pay more like 2%-3%.  The key point I'm trying to make is that if you're looking for this type of passive income, I recommend that you don't plan on the income coming from gains to the investment... This was something that ChrisinEdmonton wasn't entirely clear about. It can be complicated and expensive to whittle away at a portfolio and spend it along the way." "Historically that 'divide by 1000' rule of thumb is what many people in Australia have thought of as normal, and yes, it's about a 5.2% gross yield.  Net of expenses, perhaps 3-4%, without allowing for interest. If you're comparing this to shares, I think the right comparison is to the dividend yield, not to the overall PE.  A dividend yield of about 3-5% is also about typical: if you look at the Vanguard Index Australian Shares Fund as a proxy for the ASX the yield last year was about 4%. Obviously a 4% return is not very competitive with a term deposit.  But with both shares and housing you can hope for some capital growth in addition to the income yield.  If you get 4% rental yield plus 5% growth it is more attractive. Is it ""good"" to buy at what people have historically thought was ""normal""?  Perhaps you are better off looking around, or sitting out, until you find a much better price than normal. ""Is 5% actually historically normal?"" deserves a longer answer." Dividend prices are per share, so the amount that you get for a dividend is determined by the number of shares that you own and the amount of the dividend per share. That's all. People like to look at dividend yield because it lets them compare different investments; that's done by dividing the dividend by the value of the stock, however determined. That's the percentage that the question mentions. A dividend of $1 per share when the share price is $10 gives a 10% dividend yield. A dividend of $2 per share when the share price is $40 gives a 5% dividend yield. If you're choosing an investment, the dividend yield gives you more information than the amount of the dividend. "Answering this question is weird, because it is not really precise in what you mean. Do you want all stocks in the US? Do you want a selection of stocks according to parameters?  Do you just want a cool looking graph? However, your possible misuse of the word derivative piqued my interest. Your reference to  gold and silver seems to indicate that you do not know what a derivative actually is. Or what it would do in a portfolio.  The straightforward way to ""see"" an efficient frontier is to do the following. For a set of stocks (in this case six ""randomly"" selected ones):      library(quantmod)  library(fPortfolio)  library(PerformanceAnalytics)     getSymbols(c(""STZ"", ""RAI"", ""AMZN"", ""MSFT"", ""TWX"", ""RHT""), from = ""2012-06-01"", to = ""2017-06-01"")     returns &lt;- NULL  tickerlist &lt;- c(""STZ"", ""RAI"", ""AMZN"", ""MSFT"", ""TWX"", ""RHT"")  for (ticker in tickerlist){   returns &lt;- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker)))))  }  colnames(returns) &lt;- tickerlist  returns &lt;- as.timeSeries(returns)    frontier &lt;- portfolioFrontier(returns)  png(""frontier.png"", width = 800, height = 600)  plot(frontier, which = ""all"")  dev.off()    minvariancePortfolio(returns, constraints = ""LongOnly"")    Portfolio Weights:    STZ    RAI   AMZN   MSFT    TWX    RHT   0.1140 0.3912 0.0000 0.1421 0.1476 0.2051     Covariance Risk Budgets:    STZ    RAI   AMZN   MSFT    TWX    RHT   0.1140 0.3912 0.0000 0.1421 0.1476 0.2051     Target Returns and Risks:   mean    Cov   CVaR    VaR   0.0232 0.0354 0.0455 0.0360    https://imgur.com/QIxDdEI  The minimum variance portfolio of these six assets has a mean return is 0.0232 and variance is 0.0360. AMZN does not get any weight in the portfolio.  It kind of means that the other assets span it and it does not provide any additional diversification benefit.   Let us add two ETFs that track gold and silver to the mix, and see how little difference it makes:    getSymbols(c(""GLD"", ""SLV""), from = ""2012-06-01"", to = ""2017-06-01"")    returns &lt;- NULL  tickerlist &lt;- c(""STZ"", ""RAI"", ""AMZN"", ""MSFT"", ""TWX"", ""RHT"", ""GLD"", ""SLV"")  for (ticker in tickerlist){   returns &lt;- cbind(returns, monthlyReturn(Ad(eval(as.symbol(ticker)))))  }  colnames(returns) &lt;- tickerlist  returns &lt;- as.timeSeries(returns)   frontier &lt;- portfolioFrontier(returns)    png(""weights.png"", width = 800, height = 600)  weightsPlot(frontier)  dev.off()    # Optimal weights  out &lt;- minvariancePortfolio(returns, constraints = ""LongOnly"")  wghts &lt;- getWeights(out)  portret1 &lt;- returns%*%wghts  portret1 &lt;- cbind(monthprc, portret1)[,3]  colnames(portret1) &lt;- ""Optimal portfolio""    # Equal weights  wghts &lt;- rep(1/8, 8)  portret2 &lt;- returns%*%wghts  portret2 &lt;- cbind(monthprc, portret2)[,3]  colnames(portret2) &lt;- ""Equal weights portfolio""   png(""performance_both.png"", width = 800, height = 600)  par(mfrow=c(2,2))  chart.CumReturns(portret1, ylim = c(0, 2))  chart.CumReturns(portret2, ylim = c(0, 2))  chart.Drawdown(portret1, main = ""Drawdown"", ylim = c(-0.06, 0))  chart.Drawdown(portret2, main = ""Drawdown"", ylim = c(-0.06, 0))  dev.off()   https://imgur.com/sBHGz7s   Adding gold changes the minimum variance mean return to 0.0116 and the variance stays about the same 0.0332. You can see how the weights change at different return and variance profiles in the picture.  The takeaway is that adding gold decreases the return but does not do a lot for the risk of the portfolio.  You also notice that silver does not get included in the minimum variance efficient portfolio (and neither does AMZN).  https://imgur.com/rXPbXau  We can also compare the optimal weights to an equally weighted portfolio and see that the latter would have performed better but had much  larger drawdowns. Which is because it has a higher volatility, which might be undesirable.  ---  Everything below here is false, but illustrative.  So what about the derivative part? Let us assume you bought an out of the money call option with a strike of 50 on MSFT at the beginning of the  time series and held it to the end.  We need to decide on the the annualized cost-of-carry rate, the annualized rate of interest, the time to maturity is measured in years, the annualized  volatility of the underlying security is proxied by the historical volatility.   library(fOptions)   monthprc &lt;- Ad(MSFT)[endpoints(MSFT, ""months"")]  T &lt;- length(monthprc) # 60 months, 5 years  vol &lt;- sd(returns$MSFT)*sqrt(12) # annualized volatility    optprc &lt;- matrix(NA, 60, 1)  for (t in 1:60) {   s &lt;- as.numeric(monthprc[t])   optval &lt;- GBSOption(TypeFlag = ""c"", S = s, X = 50, Time = (T - t) / 12, r = 0.001, b = 0.001, sigma = vol)   optprc[t] &lt;- optval@price  }    monthprc &lt;- cbind(monthprc, optprc)  colnames(monthprc) &lt;- c(""MSFT"", ""MSFTCall50"")    MSFTCall50rets &lt;- monthlyReturn(monthprc[,2])  colnames(MSFTCall50rets) &lt;- ""MSFTCall50rets""    returns &lt;- merge(returns, MSFTCall50rets)    wghts &lt;- rep(1/9, 9)    portret3 &lt;- returns%*%wghts  portret3 &lt;- cbind(monthprc, portret3)[,3]  colnames(portret3) &lt;- ""Equal weights derivative portfolio""    png(""performance_deriv.png"", width = 800, height = 600)  par(mfrow=c(2,2))  chart.CumReturns(portret2, ylim = c(0, 4.5))  chart.CumReturns(portret3, ylim = c(0, 4.5))  chart.Drawdown(portret2, main = ""Drawdown"", ylim = c(-0.09, 0))  chart.Drawdown(portret3, main = ""Drawdown"", ylim = c(-0.09, 0))  dev.off()  https://imgur.com/SZ1xrYx   Even though we have a massively profitable instrument in the derivative. The portfolio analysis does not include it  because of the high volatility. However, if we just use equal weighting and essentially take a massive position in  the out of the money call (which would not be possible in real life), we get huge drawdowns and volatility, but  the returns are almost two fold. But nobody will sell you a five year call.  Others can correct any mistakes or misunderstandings in the above. It hopefully gives a starting point.  Read more at:   https://en.wikipedia.org/wiki/Modern_portfolio_theory https://en.wikipedia.org/wiki/Option_(finance)  The imgur album:  https://imgur.com/a/LoBEY" "A stock, at its most basic, is worth exactly what someone else will pay to buy it right now (or in the near future), just like anything else of value. However, what someone's willing to pay for it is typically based on what the person can get from it. There are a couple of ways to value a stock. The first way is on expected earnings per share, most of would normally (but not always) be paid in dividends. This is a metric that can be calculated based on the most recently reported earnings, and can be estimated based on news about the company or the industry its in (or those of suppliers, likely buyers, etc) to predict future earnings. Let's say the stock price is exactly $100 right now, and you buy one share. In one quarter, the company is expected to pay out $2 per share in dividends. That is a 2% ROI realized in 3 months. If you took that $2 and blew it on... coffee, maybe, or you stuffed it in your mattress, you'd realize a total gain of $8 in one year, or in ROI terms an annual rate of 8%. However, if you reinvested the money, you'd be making money on that money, and would have a little more. You can calculate the exact percentage using the ""future value"" formula. Conversely, if you wanted to know what you should pay, given this level of earnings per share, to realize a given rate of return, you can use the ""present value"" formula. If you wanted a 9% return on your money, you'd pay less for the stock than its current value, all other things being equal. Vice-versa if you were happy with a lesser rate of return. The current rate of return based on stock price and current earnings is what the market as a whole is willing to tolerate. This is how bonds are valued, based on a desired rate of return by the market, and it also works for stocks, with the caveat that the dividends, and what you'll get back at the ""end"", are no longer constant as they are with a bond. Now, in your case, the company doesn't pay dividends. Ever. It simply retains all the earnings it's ever made, reinvesting them into doing new things or more things. By the above method, the rate of return from dividends alone is zero, and so the future value of your investment is whatever you paid for it. People don't like it when the best case for their money is that it just sits there. However, there's another way to think of the stock's value, which is it's more core definition; a share of the company itself. If the company is profitable, and keeps all this profit, then a share of the company equals, in part, a share of that retained earnings. This is very simplistic, but if the company's assets are worth 1 billion dollars, and it has one hundred million shares of stock, each share of stock is worth $10, because that's the value of that fraction of the company as divided up among all outstanding shares. If the company then reports earnings of $100 million, the value of the company is now 1.1 billion, and its stock should go up to $11 per share, because that's the new value of one ten-millionth of the company's value. Your ROI on this stock is $1, in whatever time period the reporting happens (typically quarterly, giving this stock a roughly 4% APY). This is a totally valid way to value stocks and to shop for them; it's very similar to how commodities, for instance gold, are bought and sold. Gold never pays you dividends. Doesn't give you voting rights either. Its value at any given time is solely what someone else will pay to have it. That's just fine with a lot of people right now; gold's currently trading at around $1,700 an ounce, and it's been the biggest moneymaker in our economy since the bottom fell out of the housing market (if you'd bought gold in 2008, you would have more than doubled your money in 4 years; I challenge you to find anything else that's done nearly as well over the same time). In reality, a combination of both of these valuation methods are used to value stocks. If a stock pays dividends, then each person gets money now, but because there's less retained earnings and thus less change in the total asset value of the company, the actual share price doesn't move (much). If a stock doesn't pay dividends, then people only get money when they cash out the actual stock, but if the company is profitable (Apple, BH, etc) then one share should grow in value as the value of that small fraction of the company continues to grow. Both of these are sources of ROI, and both are seen in a company that will both retain some earnings and pay out dividends on the rest." How do you find good quality dividend stocks? That is an easy one. Past performance has always been my key to this answer. also remember why you are investing in the first place. Do you want cash flow, security or capital growth. Also let's not forget... how much time do you want to devote to this venture. There is going to be a balance in your investing and your returns. More time in... the higher returns you get.  As for finding good dividend stocks, look to the Dividend Aristocrats or the Dividend Contenders. These companies have consistently increased their payouts to their investors for years. There is a trading strategy that could escalate your returns. Dividend Capturing, simply put... You buy the stock before the ex-date and sell after date of record. Thus collecting a dividend and moving on to the next one. Warning: though this is a profitable strategy, it only works with certain stocks so do your research or find a good source.