In This Article:
Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Dexus Convenience Retail REIT (ASX:DXC) share price. It's up 17% over three years, but that is below the market return. Unfortunately, the share price has fallen 0.9% over twelve months.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Dexus Convenience Retail REIT
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Dexus Convenience Retail REIT was able to grow its EPS at 8.2% per year over three years, sending the share price higher. The average annual share price increase of 6% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
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?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, Dexus Convenience Retail REIT's TSR for the last 3 years was 42%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Over the last year Dexus Convenience Retail REIT shareholders have received a TSR of 5.7%. Unfortunately this falls short of the market return of around 11%. At least the longer term returns (running at about 12% a year, are better. Even the best companies don't see strong share price performance every year. 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. To that end, you should learn about the 4 warning signs we've spotted with Dexus Convenience Retail REIT (including 1 which shouldn't be ignored) .