If You Had Bought China Telecom's (HKG:728) Shares Five Years Ago You Would Be Down 40%

By
Simply Wall St
Published
November 17, 2020
SEHK:728

Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term China Telecom Corporation Limited (HKG:728) shareholders for doubting their decision to hold, with the stock down 40% over a half decade. Shareholders have had an even rougher run lately, with the share price down 15% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Check out our latest analysis for China Telecom

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

earnings-per-share-growth
SEHK:728 Earnings Per Share Growth November 17th 2020

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for China Telecom the TSR over the last 5 years was -29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

China Telecom shareholders are down 19% for the year (even including dividends), but the market itself is up 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand China Telecom better, we need to consider many other factors. For instance, we've identified 1 warning sign for China Telecom that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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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