By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Keppel DC REIT (SGX:AJBU), which is up 35%, over three years, soundly beating the market return of 7.0% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 9.8% in the last year, including dividends.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
During the three years of share price growth, Keppel DC REIT actually saw its earnings per share (EPS) drop 2.1% per year. Companies are not always focussed on EPS growth in the short term, and looking at how the share price has reacted, we don’t think EPS is the most important metric for Keppel DC REIT at the moment. So other metrics may hold the key to understanding what is influencing investors.
We note that the dividend is higher than it was preciously, so that may have assisted the share price. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time. The revenue growth of about 21% per year might also encourage buyers.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
We know that Keppel DC REIT has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Keppel DC REIT
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Keppel DC REIT the TSR over the last 3 years was 60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Pleasingly, Keppel DC REIT’s total shareholder return last year was 9.8%. That’s including the dividend. But the three year TSR of 17% per year is even better. Keeping this in mind, a solid next step might be to take a look at Keppel DC REIT’s dividend track record. This free interactive graph is a great place to start.
But note: Keppel DC REIT may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.