If You Had Bought Duxton Water (ASX:D2O) Shares Three Years Ago You'd Have Made 44%
By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, Duxton Water Limited (ASX:D2O) shareholders have seen the share price rise 44% over three years, well in excess of the market return (19%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.4% in the last year , including dividends .
See our latest analysis for Duxton Water
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Duxton Water, it has a TSR of 62% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Duxton Water produced a TSR of 8.4% over the last year. Unfortunately this falls short of the market return of around 22%. At least the longer term returns (running at about 17% a year, are better. We prefer focus on longer term returns, as they are usually a more meaningful indication of the underlying business. 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. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Duxton Water (of which 3 are a bit unpleasant!) you should know about.
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 AU exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
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. Thank you for reading.
