Dividend Reinvestment query

Please explain how the Total Return is calculated when using the dividend reinvestment plan. My father believes the total on sharesight is incorrect as it is essentially crediting the dividend twice.
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  • Hi Gill,

    Thanks for your question.

    You can think of dividend reinvestments as receiving the dividend payment in cash and then choosing to use that cash to purchase new shares.

    Firstly the dividend payment is recorded, this results in the appropriate dividend gain (and of course you need the dividend details recorded for tax purposes).

    Secondly the new shares are recorded as a purchase. It's important to note that assuming the shares are recorded at market value, this will not result in any capital gain or loss being calculated so there is no double counting. As the market price changes, the gain or loss on the newly acquired shares will contribute correspondingly to the total return.
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