A better way to understand TRS

Different companies can arrive at the same level of total returns to shareholders (TRS) through significantly different paths. Traditional ways of assessing the factors that influence TRS don’t help companies or investors to understand why.
A better approach dissects TRS into four parts and helps companies to make more substantive comparisons and to set appropriate performance goals.

Exhibit 1: Most traditional ways of understanding TRS are flawed.
Exhibit 2: For a company partly financed by debt, the traditional decomposition approach suggests a higher dividend yield and a stronger increase in expectations, ignoring the impact of total returns to shareholders (TRS) from leverage.
Exhibit 3: TRS performance of the Dutch brewer Heineken and its Belgian–Brazilian competitor InBev provides a case in point for a more nuanced TRS decomposition.
Exhibit 4: An improvement in the return on equity of the largest European banks has been the key driver of their TRS—not growth, as the traditional approach implies.