How do I calculate annual return for each of the 5 years from monthly historical data?

Question

How do I calculate the annual return for each of the 5 years from monthly historical data? How do I account for stock split and dividends in the year?

I'm not sure if this is the way to calculate.

Simple Dividend-Adjusted Return = (Year end adj close - split adjusted year start adj close) / split adjusted year start adj close)
Annual Dividend-Adjusted Return = (Simple Dividend-Adjusted Return +1) ^ (1 / Years Held) -1

https://finance.yahoo.com/quote/TCEHY/history?period1=1388505600&period2=1546185600&interval=1mo&filter=history&frequency=1mo

Calculate 2014 annual return.

2014 monthly prices:

Answer 1

Additional points in your question:

** STOCK SPLITS & DIVIDENDS **

Regarding stock splits and dividends, the principle is to compare like for like. If you held 1 share at the start of the period, what would you be holding now?

If the stock has split, for example, so one share has become (say) 3 then you compare the price of one share in Dec'13 to the price of three shares in Dec '14.

If a dividend was paid during the period then the value in Dec'14 would be the value of shares + the value of the dividend.

Then compare the two values as per @d-stanley's answer.

** DIVIDEND RE-INVESTMENT ASSUMPTIONS **

One additional subtlety with dividends: you will have received cash during the couse of the year so we need to make an assumption about how the dividends were re-invested for the remainder of the period.

One common assumption is to assume it was re-invested in the same stock, so for example if received a 25p per share dividend at a time when the (ex-dividend) price was 500p (5% dividend yield) you could hypothetically buy one more share for each 20 you hold. In calculating the return you would compare 1 share in Dec'13 with (1+ dividend yield) shares in Dec'14.

In practice (unless dividend and equity returns are very high) there will not be a big difference in the shorter term between that assumption or just adding the cash value of dividends to the value of one share.

Hope that helps.

Answer 2

Actually, you would take the Dec '13 adjusted close, not the Jan '14 adjusted close, otherwise you'd leave out one month of returns.

But the formula would be

End. Adj. Close - Beg. Adj. Close
--------------------------------
        Beg. Adj. Close

or

End. Adj. Close 
---------------   - 1
Beg. Adj. Close