Bond funds like the SPDR Portfolio Mortgage Backed Bond ETF (SPMB) often look like money-losers when you view their returns on a non-adjusted basis. In this case, the price is down about -0.74% over the life of the fund.
The picture looks very different when you adjust for dividends. For SPMB, the return changes to +46.09% over the life of the fund:
That's obviously a very different chart than the non-adjusted chart. Dividend adjustment can also make a large difference for high-yield dividend stocks. For instance, IBM is down over the last ten years on a non-adjusted basis, but on an adjusted basis it has gone sideways.
IBM, non-adjusted:
IBM, adjusted:
The commonly accepted adjustment methodology is that the most recent closing price will be the same on an adjusted and non-adjusted chart, but historical closing prices will be different. On an adjusted chart, the stock price on a historical date will be shown as the current closing price minus all dividends paid since then. Dividend subtractions typically are made on a percentage rather than dollar basis to prevent historical prices from showing as negative values. To actually perform the calculation is a little technical, but that's the overall idea.
To apply dividend adjustment to a TradingView chart is super easy. In the lower right-hand corner of your chart, you will see the letters "adj". Click to toggle between adjusted and non-adjusted price data. When the text is blue, you are viewing the adjusted chart. When the text is black, adjustment is turned off.
Right next to the letters "adj" is a "%" symbol. Toggling this on and off will switch the axis of the chart between dollars and percent change over the period visible on the chart. This is useful for comparing adjusted and non-adjusted returns.
One implication of using adjusted charts is that the support levels and moving averages will be in different places. For instance, on a non-adjusted basis, VALE is currently below its 200-week moving average. On an adjusted basis, it is well above the average.
VALE, non-adjusted:
Vale, adjusted:
In short, on an adjusted basis a stock may not be as cheap as it looks on a non-adjusted basis. Many quant traders and hedge funds will be using adjusted moving averages rather than non-adjusted ones.
The picture looks very different when you adjust for dividends. For SPMB, the return changes to +46.09% over the life of the fund:
That's obviously a very different chart than the non-adjusted chart. Dividend adjustment can also make a large difference for high-yield dividend stocks. For instance, IBM is down over the last ten years on a non-adjusted basis, but on an adjusted basis it has gone sideways.
IBM, non-adjusted:
IBM, adjusted:
The commonly accepted adjustment methodology is that the most recent closing price will be the same on an adjusted and non-adjusted chart, but historical closing prices will be different. On an adjusted chart, the stock price on a historical date will be shown as the current closing price minus all dividends paid since then. Dividend subtractions typically are made on a percentage rather than dollar basis to prevent historical prices from showing as negative values. To actually perform the calculation is a little technical, but that's the overall idea.
To apply dividend adjustment to a TradingView chart is super easy. In the lower right-hand corner of your chart, you will see the letters "adj". Click to toggle between adjusted and non-adjusted price data. When the text is blue, you are viewing the adjusted chart. When the text is black, adjustment is turned off.
Right next to the letters "adj" is a "%" symbol. Toggling this on and off will switch the axis of the chart between dollars and percent change over the period visible on the chart. This is useful for comparing adjusted and non-adjusted returns.
One implication of using adjusted charts is that the support levels and moving averages will be in different places. For instance, on a non-adjusted basis, VALE is currently below its 200-week moving average. On an adjusted basis, it is well above the average.
VALE, non-adjusted:
Vale, adjusted:
In short, on an adjusted basis a stock may not be as cheap as it looks on a non-adjusted basis. Many quant traders and hedge funds will be using adjusted moving averages rather than non-adjusted ones.