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It's possible to achieve returns close to the market-weighted average return by buying an index fund. But if you pick the right individual stocks, you could make more -- or less -- than that. The SKY Network Television Limited (NZSE:SKT) stock price is down 28% over five years, but the total shareholder return is 102% once you include the dividend. That's better than the market which declined 16% over the same time. Shareholders have had an even rougher run lately, with the share price down 18% in the last 90 days. But this could be related to the weak market, which is down 7.5% in the same period.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During five years of share price growth, SKY Network Television moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. While it's not completely obvious why the share price is down, a closer look at the company's history might help explain it.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. We note that for SKY Network Television the TSR over the last 5 years was 102%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.