Sumitomo Mitsui Trust Group (TSE:8309) stock performs better than its underlying earnings growth over last five years

The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. For example, the Sumitomo Mitsui Trust Group, Inc. (TSE:8309) share price has soared 146% in the last half decade. Most would be very happy with that. And in the last month, the share price has gained 9.6%. But the price may well have benefitted from a buoyant market, since stocks have gained 11% in the last thirty days.

Since the stock has added JP¥162b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

We check all companies for important risks. See what we found for Sumitomo Mitsui Trust Group in our free report.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Over half a decade, Sumitomo Mitsui Trust Group managed to grow its earnings per share at 11% a year. This EPS growth is lower than the 20% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. It might be well worthwhile taking a look at our free report on Sumitomo Mitsui Trust Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Sumitomo Mitsui Trust Group the TSR over the last 5 years was 204%, 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

It's nice to see that Sumitomo Mitsui Trust Group shareholders have received a total shareholder return of 5.2% over the last year. That's including the dividend. However, the TSR over five years, coming in at 25% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Importantly, we haven't analysed Sumitomo Mitsui Trust Group's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

We will like Sumitomo Mitsui Trust Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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