Free ACCA Financial Management (FM) Flashcards

Kestrel's total shareholder return is (15p dividend + 20p capital gain) / GBP4.00 = 35p / 400p = 8.75%. Marlin's total shareholder return is (0p dividend + 50p capital gain) / GBP4.00 = 50p / 400p = 12.5%. Despite paying no dividend at all, Marlin delivered a materially higher total return to shareholders over the period because its capital gain more than compensated for the lack of income. This illustrates why comparing companies on dividend policy alone is misleading -- a company that retains all its earnings to fund growth can still deliver superior shareholder wealth if that growth is reflected in a rising share price.