When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Spire Inc. (NYSE:SR) share price is up 52% in the last five years, that’s less than the market return. But if you include dividends then the return is market-beating. Zooming in, the stock is up a respectable 9.0% in the last year.
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, Spire managed to grow its earnings per share at 8.4% a year. This EPS growth is remarkably close to the 8.8% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. In the case of Spire, it has a TSR of 78% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Spire shareholders gained a total return of 12% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 12% per year over five year. This suggests the company might be improving over time. It’s always interesting to track share price performance over the longer term. But to understand Spire better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Spire (of which 1 doesn’t sit too well with us!) you should know about.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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