On average, over time, stock markets tend to rise higher. This makes investing attractive. But if you choose that path, you're going to buy some stocks that fall short of the market. Unfortunately for shareholders, while the The Bank of N.T. Butterfield & Son Limited (NYSE:NTB) share price is up 23% in the last year, that falls short of the market return. The longer term returns have not been as good, with the stock price only 16% higher than it was three years ago.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Bank of N.T. Butterfield & Son was able to grow EPS by 2.3% in the last twelve months. This EPS growth is significantly lower than the 23% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Bank of N.T. Butterfield & Son 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 Bank of N.T. Butterfield & Son stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Bank of N.T. Butterfield & Son the TSR over the last year was 29%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Bank of N.T. Butterfield & Son produced a TSR of 29% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 37%. On the other hand, the TSR over three years was worse, at just 9.4% per year. This suggests the company's position is improving. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. Before forming an opinion on Bank of N.T. Butterfield & Son you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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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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