China Construction Bank (HKG:939) Shareholders Booked A 32% Gain In The Last Three Years

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One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at China Construction Bank Corporation (HKG:939), which is up 32%, over three years, soundly beating the market return of 25% (not including dividends).

See our latest analysis for China Construction Bank

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

China Construction Bank was able to grow its EPS at 3.5% per year over three years, sending the share price higher. In comparison, the 9.6% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into China Construction Bank's key metrics by checking this interactive graph of China Construction Bank's earnings, revenue and cash flow.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, China Construction Bank's TSR for the last 3 years was 45%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 4.6% in the twelve months, China Construction Bank shareholders did even worse, losing 6.3% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 8.1% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Keeping this in mind, a solid next step might be to take a look at China Construction Bank's dividend track record. This free interactive graph is a great place to start.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK 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 editorial-team@simplywallst.com. 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.