Did You Participate In Any Of China Construction Bank's (HKG:939) Respectable 77% Return?

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But China Construction Bank Corporation (HKG:939) has fallen short of that second goal, with a share price rise of 34% over five years, which is below the market return. However, if you include the dividends then the return is market beating. Zooming in, the stock is actually down 3.4% in the last year.

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, China Construction Bank managed to grow its earnings per share at 1.1% a year. This EPS growth is slower than the share price growth of 6% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for China Construction Bank the TSR over the last 5 years was 77%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Construction Bank provided a TSR of 2.3% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Importantly, we haven't analysed China Construction Bank's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

But note: China Construction Bank may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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