Koninklijke KPN's (AMS:KPN) investors will be pleased with their favorable 70% return over the last five years

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 Koninklijke KPN N.V. (AMS:KPN) has fallen short of that second goal, with a share price rise of 34% over five years, which is below the market return. But if you include dividends then the return is market-beating. Looking at the last year alone, the stock is up 12%.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Koninklijke KPN

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

During five years of share price growth, Koninklijke KPN achieved compound earnings per share (EPS) growth of 13% per year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Koninklijke KPN's TSR for the last 5 years was 70%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Koninklijke KPN has rewarded shareholders with a total shareholder return of 18% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 11% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Koninklijke KPN is showing 2 warning signs in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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