Diversified Royalty's (TSE:DIV) investors will be pleased with their decent 90% return over the last three years
One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Diversified Royalty Corp. (TSE:DIV) share price is up 49% in the last three years, clearly besting the market return of around 32% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 14% in the last year , including dividends .
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Diversified Royalty
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.
Diversified Royalty became profitable within the last three years. So we would expect a higher share price over the period.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Diversified Royalty has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Diversified Royalty stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Diversified Royalty the TSR over the last 3 years was 90%, 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
It's good to see that Diversified Royalty has rewarded shareholders with a total shareholder return of 14% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Diversified Royalty better, we need to consider many other factors. For example, we've discovered 5 warning signs for Diversified Royalty (2 are a bit unpleasant!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Canadian exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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