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One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. For example, the Parkway Life Real Estate Investment Trust (SGX:C2PU) share price is up 18% in the last three years, clearly besting than the market return of around 12% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 8.9%, including dividends.
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. 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 three years of share price growth, Parkway Life Real Estate Investment Trust achieved compound earnings per share growth of 31% per year. The average annual share price increase of 5.8% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.55.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Parkway Life Real Estate Investment Trust has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Parkway Life Real Estate Investment Trust stock, you should check out this FREE detailed report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Parkway Life Real Estate Investment Trust the TSR over the last 3 years was 37%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Parkway Life Real Estate Investment Trust shareholders have received a total shareholder return of 8.9% over the last year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 8.2%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before forming an opinion on Parkway Life Real Estate Investment Trust you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
Of course Parkway Life Real Estate Investment Trust may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 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. Thank you for reading.