These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the CapitaLand Retail China Trust (SGX:AU8U) share price is up 13% in the last year, clearly besting the market return of around 0.4% (not including dividends). So that should have shareholders smiling. Unfortunately the longer term returns are not so good, with the stock falling 3.8% in the last three years.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
CapitaLand Retail China Trust was able to grow EPS by 1.1% in the last twelve months. The share price gain of 13% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.
The graphic below depicts how EPS has changed over time.
This free interactive report on CapitaLand Retail China Trust’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for CapitaLand Retail China Trust the TSR over the last year was 22%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It’s nice to see that CapitaLand Retail China Trust shareholders have received a total shareholder return of 22% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6.7% per year), it would seem that the stock’s performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.