Bank of N.T. Butterfield & Son's (NYSE:NTB) one-year earnings growth trails the decent shareholder returns

By
Simply Wall St
Published
September 26, 2021
NYSE:NTB
Source: Shutterstock

Passive investing in index funds can generate returns that roughly match the overall market. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) share price is up 53% in the last 1 year, clearly besting the market return of around 35% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 36% lower than it was three years ago.

Since the stock has added US$62m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Bank of N.T. Butterfield & Son

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. 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.

During the last year Bank of N.T. Butterfield & Son grew its earnings per share (EPS) by 0.5%. The share price gain of 53% certainly outpaced the EPS growth. So it's fair to assume the market has a higher opinion of the business than it a year ago.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NYSE:NTB Earnings Per Share Growth September 26th 2021

It might be well worthwhile taking a look at our free report on Bank of N.T. Butterfield & Son'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. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Bank of N.T. Butterfield & Son's TSR for the last 1 year was 61%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Bank of N.T. Butterfield & Son has rewarded shareholders with a total shareholder return of 61% in the last twelve months. That's including the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Bank of N.T. Butterfield & Son better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Bank of N.T. Butterfield & Son you should be aware of.

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 US 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.
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