Investors are understandably disappointed when a stock they own declines in value. But it's hard to avoid some disappointing investments when the overall market is down. While the KIP Real Estate Investment Trust (KLSE:KIPREIT) share price is down 12% in the last three years, the total return to shareholders (which includes dividends) was 11%. And that total return actually beats the market decline of 0.9%.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
KIP Real Estate Investment Trust saw its EPS decline at a compound rate of 14% per year, over the last three years. This fall in the EPS is worse than the 4% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on KIP Real Estate Investment Trust's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of KIP Real Estate Investment Trust, it has a TSR of 11% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Over the last year KIP Real Estate Investment Trust shareholders have received a TSR of 0.9%. Unfortunately this falls short of the market return of around 3.7%. But the (superior) three-year TSR of 4% per year is some consolation. Even the best companies don't see strong share price performance every year. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - KIP Real Estate Investment Trust has 5 warning signs (and 1 which shouldn't be ignored) we think you should know about.
But note: KIP Real Estate Investment Trust 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 MY 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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