Final answer:
To evaluate if D.R. Horton has added value for stockholders, one can examine metrics such as cumulative total return, increase in stock price, market/book value, EPS, dividend payout ratio, and P/E ratio. Capital gains and dividends together determine the total return for an investor.
Step-by-step explanation:
The student is asking how to assess whether D.R. Horton has added value for stockholders by examining various metrics related to shareholder returns. To analyze this, one should look at factors like:
- cumulative total return, which would include both dividends and capital gains,
- increase in stock price, reflecting the capital gains aspect solely,
- market/book value, showing the valuation of the company based on market price versus its book value,
- Earnings Per Share (EPS), indicating the proportion of a company's profit allocated to each outstanding share,
- dividend payout ratio, which tells how much of the profits are paid out as dividends to shareholders,
- Price to Earnings (P/E) ratio, a valuation metric comparing a company’s current share price to its per-share earnings.
An investor might buy a share of stock for a certain price and sell it for higher, realizing a capital gain. This, coupled with any dividends received, contributes to the overall return on investment.