Hey y'all.
I'm trying to follow this discussion, with limited success. A concrete example might help me out. Can I get your opinions on some stock I bought a while back? I bought it as ORB (Orbital) and I bought $10k worth, at around 40 something a share. It subsequently was renamed to OA and was repriced so that I now have fewer shares. However, it keeps going up, so now my stock's worth $14,365. On top of that, I recently got a dividend of about $50.
It's been very successful, I think, and I'm pleased with it. Or I was, until I started reading this thread.
Ok, there are a few things going on here. First, you mentioned that the stock was "repriced so that I now have fewer shares". That's called a reverse stock split. Companies can split their stock or "reverse-split' their stock to try to keep the per-share price within a certain range. What's important to know is that these do not change the value of the company (or your investment in the company) at all. For example, company XXX* could have 1 million outstanding shares priced at $20 per share, meaning the value of the company would be $20MM ($20 x 1MM). The company could choose to split that stock 2:1 so that there are now 2 million shares, but those shares would be worth half as much, or $10. The company would still be worth the exact same $20MM (2MM shares x $10). OR, the company could reverse-split it's shares, meaning there would be just 500,000 shares valued at $40/share. Again, the company would be worth $20MM.
Glancing at OA, it looks like there was a 3:2 split in 2002, 2001 & 2000. What's odd is this seems like you should have more shares, not less.
Second, there is the dividend to consider. Dividends are determined ahead of time, (usually) paid quarterly, and are paid on a per-share basis. If a company pays $1 per share and you own 10 shares... guess what, you get $10. The dividend yield is simply the dividend dollar amount divided by the share price. The yield will change slightly as the share price goes up or down. Companies often try to keep their dividend yield around the same level, so if the company's stock goes up they might increase the dividend for the next quarter so that the dividend yield stays approximately the same. In the case of OA, it has a dividend of $0.26 per share per quarter, and a yield of 1.67%. It's worth noting that OA cut it's dividend last quarter from 0.32/share to 0.26/share (per quarter).
If your dividends are 'reinvested,' you will get more shares each quarter... in your case ~ 0.7 new shares ($50 dividend / $72 share price). Reinvested over very long time periods (decades+) dividends can easily make up the majority of your gains due to compoundings.
If you don't reinvest your dividends, you simpyl get a check every quarter (yay, money!)
Finally, you mentioned that you've had ~40% gains on this stock. It's always good to come out ahead, but to truly know how your investment did you need to compare it to a benchmark. OA makes defense and aeronautic equipment, so it's helpful to compare it to how that sector did over the same time period. I don't know much about this sector but a quick googling showed me that there's an aerospace & defense ETF that includes stocks like Boeing, Lockheed Martin, etc. I also always find it useful to compare how a stock would ahve done against the broader market (SP500 if it's a large stock, or a mid-cap index or small-cap index if it's a smaller company).
Then, if you've held the stock for many years, your should take into account inflation. A 40% gain might sound great, but if you bought it in 1995 (as an example) you need to compare 1995 dollars with 2015 dollars. There are many ways of doing this, but just using the CPI, $10,000 in 1995 would be the same as $15,500 today. That's the power of inflation, and why a great "gain" on a stock held for 10+ years might not be as great as you initially thought.
I hope that helps some.