First Abu Dhabi Bank P.J.S.C (ADX:FAB) Has Compensated Shareholders With A Respectable 56% Return On Their Investment

By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the First Abu Dhabi Bank P.J.S.C. (ADX:FAB) share price is up 32% in the last three years, clearly besting the market return of around 1.4% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 6.9% , including dividends .

See our latest analysis for First Abu Dhabi Bank P.J.S.C

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During three years of share price growth, First Abu Dhabi Bank P.J.S.C achieved compound earnings per share growth of 0.5% per year. In comparison, the 10% per year gain in the share price outpaces the EPS growth. So it's fair to assume the market has a higher opinion of the business than it did three years ago. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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 First Abu Dhabi Bank P.J.S.C the TSR over the last 3 years was 56%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Over the last year First Abu Dhabi Bank P.J.S.C shareholders have received a TSR of 6.9%. It's always nice to make money but this return falls short of the market return which was about 18% for the year. But the (superior) three-year TSR of 16% per year is some consolation. Even the best companies don't see strong share price performance every year. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for First Abu Dhabi Bank P.J.S.C that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AE exchanges.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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