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One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, Kerry Properties Limited (HKG:683) shareholders have seen the share price rise 14% over three years, well in excess of the market return (9.3%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 7.6% , including dividends .
View our latest analysis for Kerry Properties
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
Kerry Properties was able to grow its EPS at 14% per year over three years, sending the share price higher. The average annual share price increase of 4.5% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.35.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Kerry Properties's earnings, revenue and cash flow.
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 Kerry Properties, it has a TSR of 30% 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
It's good to see that Kerry Properties has rewarded shareholders with a total shareholder return of 7.6% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 3.7% 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. Keeping this in mind, a solid next step might be to take a look at Kerry Properties's dividend track record. This free interactive graph is a great place to start.