Investors in Agricultural Bank of China (HKG:1288) have seen decent returns of 37% over the past year

If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Agricultural Bank of China Limited (HKG:1288) share price is up 25% in the last 1 year, clearly besting the market return of around 4.4% (not including dividends). That's a solid performance by our standards! The longer term returns are positive, with the share price up 22% in three years.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Agricultural Bank of China

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Agricultural Bank of China was able to grow EPS by 6.3% in the last twelve months. This EPS growth is significantly lower than the 25% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Agricultural Bank of China's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Agricultural Bank of China the TSR over the last 1 year was 37%, 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

We're pleased to report that Agricultural Bank of China shareholders have received a total shareholder return of 37% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before forming an opinion on Agricultural Bank of China you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

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 Hong Kong exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.