By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, CareTrust REIT, Inc. (NASDAQ:CTRE) shareholders have seen the share price rise 85% over three years, well in excess of the market return (39%, not including dividends).
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years of share price growth, CareTrust REIT achieved compound earnings per share growth of 41% per year. The average annual share price increase of 23% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that CareTrust REIT has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling CareTrust REIT stock, you should check out this FREE detailed report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for CareTrust REIT the TSR over the last 3 years was 113%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We’re pleased to report that CareTrust REIT rewarded shareholders with a total shareholder return of 90% over the last year. And yes, that does include the dividend. That gain actually surpasses the 29% TSR it generated (per year) over three years. These improved returns may hint at some real business momentum, implying that now could be a great time to delve deeper. Importantly, we haven’t analysed CareTrust REIT’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.