By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Sands China Ltd. (HKG:1928), which is up 46%, over three years, soundly beating the market return of 31% (not including dividends). On the other hand, the returns haven’t been quite so good recently, with shareholders up just 2.7%, including dividends.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Sands China was able to grow its EPS at 8.7% per year over three years, sending the share price higher. In comparison, the 13% 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).
We know that Sands China has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sands China the TSR over the last 3 years was 72%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Sands China has rewarded shareholders with a total shareholder return of 2.7% in the last twelve months. That’s including the dividend. That certainly beats the loss of about 1.6% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. Importantly, we haven’t analysed Sands China’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
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 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 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.