Investopedia explains Annual ReturnFor example, consider an investor that purchases a stock on January 1, 2000, for $20. The investor then sells it on January 1, 2005, for $35 – a $15 profit. The investor also received a total of $2 in dividends over the five-year holding period. In this example, the investor’s total return over five years would be $17, or (17/20) 85% of the initial investment. The annual return required to achieve 85% over five years follows the formula for the compound annual growth rate (CAGR):

(37/20) ^(1/5 (yr)) – 1 = 13.1% annual return
Annual-return statistics are commonly quoted in promotional materials for mutual funds, ETFs and other individual securities.