What is Dividend Adjusted Return?

An accurate historical return calculation for an investment should be done with the dividends in mind, such as assuming all dividends were reinvested, which is the most common way they are used.

Accurate historical information concerning prices and return should take the stock splits, dividends, and so-on into account. In a lesser-known context, dividend adjustment means a payment of accrued but yet-unpaid dividend amounts to the bearer of convertible preferred stock at the time that he or she converts them to shares of common stock.

So in that case it refers to an amount that is paid to a shareholder when they convert at a time that is not immediately after the preferred stock dividend was paid.

To confuse the issue further, when attempting to determine the intrinsic value of a dividend-paying stock, in consideration of the future dividends that are likely to be paid on it, there are methods such as the Dividend Discount Model (DDM) which factor in a present-value calculation for the expected future dividend. This helps investors determine whether a stock price is overvalued or undervalued.

The Center for Research in Security Prices (CRSP) at Booth School of Business at the University of Chicago has established standards for evaluating historical returns with respect to splits and dividends. Yahoo Finance offers an option to get Adjusted data which accounts for this.